In November, Waymo announced it would begin testing fully driverless vehicles with no one in the driver's seat. Then, last week, GM petitioned the federal government for approval to mass-produce a car with no steering wheel or pedals—with plans to release it in 2019. In short, driverless cars are on the cusp of shifting from laboratory research projects to real, shipping products.

A new report from the consulting firm Navigant ranks the major players in this emerging driverless car industry. Navigant analysts see GM and Waymo as the clear industry leaders, while Ford, Daimler (teamed up with auto supplier Bosch), and Volkswagen Group are also strong contenders in Navigant's view.

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Dominating the driverless car business will require both advanced autonomous vehicle technology as well as the ability to mass-produce cars with the necessary sensors and computing hardware. In this respect, Silicon Valley tech companies and the OEMs face opposite challenges. Waymo has long been the leader in driverless software, but it needs to find a partner to help it manufacture the cars that will run that software. Conversely, car companies know how to build cars but don't necessarily have the expertise to create the kind of sophisticated software required for fully self-driving vehicles.

GM's strategy to solve this problem was to acquire a Silicon Valley company called Cruise two years ago. Meanwhile, Waymo has signed a small deal with Fiat Chrysler for 600 vehicles but is still looking for a permanent partner that will help scale up its planned driverless taxi service.

Tesla is the only Silicon Valley company with significant experience manufacturing cars, so, in theory, it should be perfectly positioned to take advantage of the driverless trend. But that isn't how things have been playing out. Navigant actually ranks Tesla dead last, alongside Apple, out of 19 companies.

Tesla has struggled since ditching Mobileye

Tesla claimed an early lead in the autonomous vehicle race when it introduced a driver-assistance feature called Autopilot in 2015. The original version of Autopilot used hardware from an Israeli company called Mobileye, but the two companies split after a deadly Autopilot-related crash in 2016. Since then, Tesla has been trying to build its own version of Autopilot, known as version two, from the ground up. Tesla CEO Elon Musk said last year that he expects full self-driving capabilities to arrive in about two years.

If Musk could deliver on that timeline, it would make Tesla one of the leading companies in the driverless car race. But Tesla's Autopilot development efforts haven't gone smoothly.


"The Autopilot system on current products has stagnated and, in many respects, regressed since it was first launched in late 2015," Navigant writes. "More than one year after launching V2, Autopilot still lacks some of the functionality of the original, and there are many anecdotal reports from owners of unpredictable behavior."

"In a May 2017 TED talk, Musk claimed the systems being built today would be Level 5 capable"—that is, suitable for full self-driving with just a software update—"by 2019," Navigant notes. "However, this is unlikely to ever be achievable."

The reason, Navigant notes, is that Tesla's current systems lack several key components required for fully self-driving capabilities. "Current Tesla hardware lacks the ability to keep sensors clean and unobscured in poor weather as well as most of the redundant systems needed for fully automated driving," Navigant writes.


Waymo and GM have both touted the extensive redundancy in their own driverless car prototypes. Both companies' vehicles have at least two computers on board so that the second computer can take over control if the first one fails. They also have redundant power supplies and redundant controls for steering and brakes, ensuring that the vehicle will be able to come to a safe, controlled stop in the event that any single component fails.

Today's Tesla vehicles also lack lidar sensors, which most other companies in the industry consider essential for full autonomy. And "even Nvidia has expressed doubt that the computing hardware it sells to Tesla is capable of supporting full automation reliably," Navigant argues.

So there's reason to question Tesla's promise that today's Tesla vehicles can be upgraded to full self-driving capability—in 2019 or ever.


The larger problem, though, is that Tesla just doesn't seem to be making progress as rapidly as others in the industry. Tesla's attention has been consumed by the extremely slow rollout of the Model 3—Tesla delivered a paltry 1,550 Model 3 vehicles in the fourth quarter of 2017. And Tesla's Autopilot division lost a number of key engineers and managers last year.

Elon Musk has a long history of eventually reaching his goals, even if it happens months or years after his original target date. So Tesla will probably master fully driverless technology eventually. But the problem is that the rest of the industry is moving faster than most people expected just a couple of years ago. By the time Tesla ultimately achieves full self-driving capabilities, it may find that it's entering a crowded market.

GM’s Cruise acquisition is paying off big time

Navigant considers GM to be the driverless car leader, and it's not hard to see why. The automotive giant purchased a little-known driverless car startup called Cruise two years ago, and Cruise has been thriving ever since.

This kind of acquisition creates a danger that the new corporate parent's bureaucracy will smother the innovative culture that made the startup successful in the first place. But GM has managed to give Cruise CEO Kyle Vogt enough autonomy—and enough clout within GM more broadly—to continue rapidly improving its driverless car technology.


As a result, Cruise has emerged as one of Waymo's top rivals in developing fully driverless vehicle technology. While Waymo has shifted much of its testing efforts to Phoenix (where state regulatory oversight is lax), Cruise has concentrated on testing in San Francisco. Vogt has argued that San Francisco is a better testing environment because cars encounter unusual and difficult situations—like construction zones, pedestrians, and emergency vehicles—much more frequently, allowing Cruise to improve its software more quickly.

Cruise's big advantage, though, is that being owned by GM gives it access to vehicle design and manufacturing infrastructure that no technology startup could develop independently. Cruise engineers have been working closely with GM engineers on a modified Chevy Bolt that has been re-designed for driverless capabilities. Last week, GM petitioned the federal government for approval to begin manufacturing modified Bolts with no steering wheels or pedals as soon as next year.

Once Cruise is confident its software is safe and reliable, GM can begin producing these vehicles in volume. That means that, even if Cruise isn't the first to market—it looks like Waymo is likely to claim that honor—Cruise may be able to scale up more quickly, allowing Cruise to eventually capture a large share of the market.



Waymo has the best technology—now it just needs to make a lot of cars

Google was the first company to take driverless vehicle technology seriously, and it has never lost its early lead in developing driverless car software. Google's driverless car project—rebranded Waymo in 2016—announced in November that it would begin testing its cars with no driver behind the wheel. That was a sign that the company had high confidence in the safety of its vehicles. Waymo hasn't announced a date to begin commercial operations, but the company has signaled that this date is months, not years, away.

But Waymo's biggest challenge will come after it launches its initial driverless taxi service—most likely in the Phoenix area. Waymo's business model (like Cruise's) will be to offer a driverless taxi service in which the cars are owned and operated by Waymo. But Waymo doesn't have any experience with manufacturing cars.


Manufacturing cars is a complex process that requires huge amounts of both capital and labor. Waymo knows it isn't going to master car manufacturing itself, so it has been looking for manufacturing partners. Waymo has signed a couple of small deals with Fiat Chrysler to supply 600 Pacifica minivans with Waymo's proprietary sensors and hardware built in. But Waymo is going to need a lot more than 600 vehicles to launch a full-scale taxi service in the Phoenix area—to say nothing of other cities across the country and around the world.

"As 2017 was ending, Waymo still lacked a broader long-term manufacturing deal with a [carmaker] to provide one or more vehicle platforms on an ongoing basis," Navigant reports. "This remains the single biggest weakness in Waymo’s path to success."

Part of the hold-up is that the incentives of Waymo and its would-be automaker partners are not well-aligned. Waymo's business model—offering a Waymo-branded driverless taxi service—threatens to sever the link between car companies and their customers. Carmakers know that if Waymo succeeds, car companies could be relegated to the status of commodity hardware suppliers.


Also, manufacturing cars is a capital-intensive business, and that has created some frictions. The Information's Amir Efrati reported last year that Waymo was working on a partnership with Ford in 2016. However, that deal ultimately "fell apart because Waymo (then still part of Google) didn't want to front some of Ford's cost to expand manufacturing capacity to eventually produce thousands or potentially millions of electric light passenger vehicles that would be powered by Google software."

Cars are a low-margin business for Ford, and Ford would have been taking a big risk, while Waymo could have captured most of the profits if its service was a hit. It's also just inherently more difficult for engineers to collaborate if they work for different companies, since they need to worry about inadvertently exposing trade secrets. Cruise and GM engineers don't have this problem since they're all part of the same firm.

None of these hurdles is insurmountable. Waymo parent company Alphabet has plenty of money, and Waymo will be able to find someone to make some cars sooner or later. But the danger for Waymo is that it won't be able to scale up quickly enough to fully exploit its early technology lead.

Other car companies are making steady progress

While the Cruise acquisition has given GM an early lead over other car companies, most other car companies are hard at work on driverless car technology. Navigant sees Daimler, Ford, Volkswagen, and BMW as the leaders, after GM.

Daimler offers an advanced driver-assistance feature called Intelligent Drive in some 2018 models that Navigant describes as "among the most capable currently available." Daimler has forged a strategic alliance with the Tier 1 auto supplier Bosch to work on fully driverless technologies.


Navigant had Ford tied with GM for the top slot last year, but it has slipped a few notches in this year's report. While GM has put all of its driverless car chips on the Cruise effort, Ford has made several different investments in autonomous vehicle technology. Last year, Ford invested a billion dollars into a little-known startup called Argo. The year before that, Ford announced a new Silicon Valley subsidiary called Ford Smart Mobility.

"The company's overall product cadence is a bit behind some of the companies ranked ahead of it," Navigant writes. Ford has said it plans to introduce fully driverless technology by 2021. That sounded like an ambitious goal when Ford announced it in 2016, but it now looks like it could actually make Ford a bit of a laggard compared with Waymo, GM, and possibly others.

Volkswagen's Audi brand has been taking the lead in advanced driver assistance technology. Last year, Audi announced a new "Traffic Jam Pilot" that enabled fully automated driving in traffic jams going less than 37 miles per hour. But Volkswagen's longer-term strategy for fully autonomous vehicles remains hazy, and Traffic Jam Pilot's availability in the US remains subject to regulatory approval.


BMW has an alliance with Intel (which recently acquired Mobileye) and Fiat Chrysler to develop driverless car technology. "BMW's partially automated driving systems are getting incrementally more capable," Navigant reports. But here too, the longer-term plan for shifting to fully autonomous vehicles isn't clear.