By Jason Purcell and Louis Pullan-Turner
In the next 10 years, the automotive sector will see more change than in the previous 100. There has already been tremendous momentum behind the transition to electric vehicles, driven largely by Tesla. However, the shift towards autonomous driving and shared mobility services, together with the change in people’s attitudes to ownership, is even more disruptive for OEMs and existing business models for almost everyone who operates in the broader automotive ecosystem. Disruption also brings significant opportunity, and some estimates suggest that the connected and autonomous car market could be worth as much as $219 billion by 2025, with a compound annual growth rate of 14.8%.
What’s driving investment?
The size of the market opportunity has been driving investment into the autotech space, from not only venture capital and private equity funds, but also corporate and strategic investors. CB Insights reports that $5.8bn has been invested into autotech in 2018 up to the end of September, already 32% higher than the record $4.4bn invested in 2017. And the vast majority (over 70%) is going into autonomous driving technology. In an indication of how strategic this is to the auto industry, corporates and corporate venture capital funds made up nearly 50% of the investment, a much higher proportion than in the overall venture capital market.
How are auto companies responding?
It has come as a surprise to some as to just how fast traditional auto companies have responded to market innovations, in both technology and business models. Collaboration, rather than isolationism, with new innovators and tech companies is proving to be the preferred route to developing the capabilities to meet future market demands. Some examples include:
- Toyota invested $500m into Uber this year to establish a partnership in developing self-driving cars, which will combine its Guardian technology, offering automated safety features such as lane-keeping, with Uber’s autonomous technology.
- Renault-Nissan-Mitsubishi has done a deal with Google to embed the Android operating system in their vehicles, starting from 2021.
- Cruise Automation, bought by GM for “just” $1bn in 2016, has raised around $5bn this year from both Softbank and Honda, valuing the company at almost $15bn. It is developing a purpose-built driverless car from the ground up that can be manufactured in high volumes and deployed globally.
- Amazon is teaming up with General Motors and Volvo to offer delivery services directly to the trunk of your car (even if you aren’t there), using GPS location tracking and remote vehicle unlocking technology. According to Amazon, more than 15 global OEMs have already added Alexa skills to their cars, enabling drivers to perform tasks such as remotely starting their cars, managing the charging of an electric car or accessing smart home functions from their vehicles.
Strong opportunities in Europe
With a strong automotive heritage in Europe, there are a range of interesting companies attracting attention, whilst the big European auto OEMs have also been active, investing substantial sums globally.
Some of the interesting deals in Europe include:
- Lyft has acquired London-based augmented reality start up Blue Vision Labs,and is currently unveiling its first test vehicle with Ford to advance its vision for self-driving cars. Blue Vision’s technology provides both street level mapping and interactive augmented reality that lets two people see the same virtual objects.
- London-based Vitruvian Partners completed a $350m buyout of Swedish parking business EasyPark in the sector’s second largest deal by a financial buyer in December 2017.
- Israeli cyber-security firm Argus was purchased for $400 million by Continental at the end of 2017 to address the potentially catastrophic implications of any breach of a car connected to the internet while moving at speed.
On the funding side :
- AIMotive, originally from Hungary, which uses cameras and artificial intelligence to detect its surroundings and is developing a suite of fully autonomous driving software, has raised almost $50m from both financial and strategic investors including Cisco, Samsung and Robert Bosch
- Oxbotica, based in UK, which has developed autonomous control and fleet management software, recently closed an $18m series A round from IP Group and AXA
- Prophesee, a machine vision start-up from France, has raised $37m from Renault, Robert Bosch, Intel Capital and others
- Wayray, a Swiss company which is developing holographic AR for vehicles, raised $80m from Porsche, Hyundai, Alibaba and others in September 2018.
What does the future hold?
It is certain that how people and goods are transported from one place to another, the technologies that enable this, and the services that are built around this, will fundamentally change in the future, opening up big opportunities.
FirstCapital is not only tracking a wide range of high potential innovative companies in this sector across Europe, but is also in constant dialogue with buyers and investors globally, ensuring we stay at the forefront of market trends and helping our clients with win-win deals through our SMART dealmaking framework.