Opinion: why Motional's pivot bodes ill for Tesla

EV inFocus is on the bullish side for the prospects of autonomous driving (AD) in the relatively near term. But it is bearish on the likelihood that passenger driverless vehicles, either Uber-style robotaxis or private cars, will achieve meaningful penetration on public roads in the next decade.

An update this week from Motional, a US AD start-up backed by South Korea's Hyundai and Irish-American automotive technology supplier Aptiv, reinforces that view. And it hoists a red flag around the ambitions of US EV pure play Tesla and its mercurial CEO Elon Musk to develop in the near future a business based on a fleet of autonomous vehicles (AVs) — some owned by the firm and some in private hands — acting as a ride-hail service.

Motional has made material progress in AD, including the Ioniq 5 robotaxi, which it hails as "the world’s first fully-integrated Level 4 AV to be mass-produced with a smart, flexible cell-based production system" and one of the first AVs to be certified under US federal motor vehicle safety standards. It has also established commercial partnerships with ride-hail companies including Uber and Lyft to deploy AVs on their networks.

And it has completed more than 100,000 autonomous rides in Las Vegas, NV and thousands of autonomous food deliveries in Los Angeles, CA. It also recently closed a $475mn funding round from Hyundai.

Pivot

But Motional CEO Karl Iagnemma has now acknowledged that "large-scale driverless deployment will not happen overnight". And thus his firm has updated its strategic plan to focus resources on the continued development and generalisation of its core driverless technology, while de-emphasising near-term commercial deployments and ancillary activities.

That also means a streamlining of teams, resulting in a reduction in staff across the Motional business.

"Driverless vehicles will enter the market when the technology has evolved, and, just as importantly, when the business case for autonomous deployment is clear," Iagnemna says. "While we are excited by our pace of technical progress — and our initial commercial deployments have yielded valuable insights — large-scale deployment of AVs remains a goal for the future, not the present [EV inFocus' bold].".

In other words, Motional will place greater focus on developing AD technology, less on the robotaxi model of commercialisation it has previously been pursuing

Greatest opportunity

This makes a lot of sense to EV inFocus. The hurdles, in the West at least, around proving that AD technology is sufficiently safe to deploy at scale on public roads — then persuading both lawmakers to legislate for and, inextricably linked, the public to get comfortable with that scenario — are still vanishingly high.

But, even if a significant volume of driverless cars on public roads looks a decade or more away, there is huge global potential for AD in private spaces: warehouses, ports, the freight side of airports, construction sites etc. Reliably safe operation in these much less traffic-dense locations will be a lower barrier to clear, while regulation should be lighter-touch and formulated in a less risk-averse environment.

Crucially, acceptance will not be required from the general public, but from employees within those spaces. This is why EV inFocus is bullish on these private space use cases, but much less convinced about a couple of other proposed early applications of AD rollout at scale — mass transit and last-mile deliveries.

Shuttle buses or distribution around defined semi-public spaces, like transport hubs, university campuses or business parks, may be more promising ground. But we do not think that mass public transport or goods delivered on public roads are good near-term prospects, again simply because they will face many of the same obstacles as robotaxis.

Tesla's excitement over the potential for an AV ride-hail service to transform its business is thus not something for which we can generate any enthusiasm over a 10-to-15-year time horizon.

Which is not to say that, if Tesla's camera-centric AD software development does end up winning out as the most effective and economic solution, it does not have significant money-making potential. Simply that Motional's pivot is likely to be one that Tesla too will have to make: an AD software provider to the likes of forklifts, diggers and other artisanal vehicles may be a rather less glamorous vision of the future than shiny robotaxis shooting around city streets, but it is likely the far easier and quicker road to commercialisation.