The hype around autonomous cars was huge a few years ago. The big tech giants like Google and Uber were all venturing into this area. AVs as they are now known were billed as the cars of the future, and the idea itself was not far-fetched. If anything, companies in this space were already testing successful AVs.
And besides, venture capitalists seemed to have also bought into the idea and have been pumping money into autonomous cars for the last few years. It looked clear that the industry had everything needed to take off. But in recent months, the autonomous vehicle sector has had to face a few hard truths. First, it’s becoming clear that reaching mass-scale productions for autonomous cars will take longer than anticipated.
Secondly, it’s hard to see how these cars will appeal to the mass market. After all, current estimates show that AVs will be very expensive compared to normal cars. Finally, many companies in this space are realizing that car production is all about economies of scale. This will keep costs down and at least make it feasible for them to produce cars people can afford. The days of having a few small companies each working on its own AV project seem to be over.
There’s no single company that can do this alone. And these realities are starting to push early front runners in the AV sector into action. Just last week, ride-hailing service Lyft decided to shelf its ambitions to develop an autonomous car, and instead, it sold its self-driving division to a subsidiary of Japanese car maker Toyota.
Lyft is reported to have pocketed around $500 million from the deal. We have also seen several mergers in the space. For example, Aurora, one of the first companies in the self-driving car niche, merged with Uber’s autonomous car unit while Cruise reportedly acquired Voyage to consolidate its operations.
These trends show that AV companies are facing massive challenges getting these cars ready on their own and as such, the idea to combine efforts seems to be the way to go. But most experts believe that the consolidation we are seeing at the moment was long overdue. Many analysts argue that the AV industry has made many bold promises over the years and yet it has delivered very little.
With this growing skepticism, the consolidation of the industry was simply inevitable. Besides, many AV developers have been trying to do too much at the same time. Google's Waymo for example started quite well with successful tests of self-driving cars. The company even ran a limited self-driving ride-hailing pilot and managed to strike deals with several automakers to expand its production.
But soon after Waymo, also started to explore the idea of creating self-driving trucks and other commercial vehicles, something many experts argue wasn’t ended at the time. Waymo’s CEO John Krafcik who had helped launch the company has since stepped down in what many see as a clear sign of the turbulence the AV sector is seeing.
