Experts in the automotive industry have a simple message for companies figuring out how to navigate a changing vehicle market: Embrace the eventual shift to autonomous cars or you will cease to exist.
While the days of roadways being filled with computer-driven vehicles may be far in the future, the sooner companies jump on board with driverless technology, the better off they will be, said Richard Wallace, director of transportation systems analysis at the Ann Arbor-based Center for Automotive Research.
“There’s going to be evolution up and down the value chain,” Wallace told MiBiz. “If you look at it at a vehicle level, any company that thinks they’re not going to have a fully automated vehicle before too long is headed for extinction.”
That message has resonated with a handful of suppliers in West Michigan.
When Holland-based Safer Technology Solutions LLC (STS) set out to develop its automatic braking technology, it wanted to save lives at dangerous intersections. While that mission hasn’t changed, the company began to realize a void in the market for inexpensive, but reliable autonomous braking systems.
Instead of using expensive laser-based radar (known as LiDAR) and cameras like current autonomous systems, STS uses radio frequency identification (RFID) technology in tape embedded in the roadway at dangerous intersections. While severe weather can impact the effectiveness of LiDAR and other technologies, the so-called “passive information strips” STS uses provide a more reliable system to stop the vehicle if the driver fails to pay attention.
The technology also is relatively cheap at $250 per vehicle to install, said Doug Vanden Berg, chief technology officer at Safer Technology Solutions.
While still in the prototype stage, the technology developed by STS can be integrated into existing emergency braking technology or offered as an aftermarket option for older cars without driver-assistance features. The technology also can be used to notify drivers when they’re approaching construction areas or school zones, Vanden Berg said.
Now that its technology has been proven out, Safer Technology Solutions is ready to pass the technology to a willing buyer, said Jon Marcus, president of Marcus Automotive LLC, a Holland-based product design and marketing firm that assisted the company in developing its prototype.
“We feel there may be other companies that have complementary products,” he said. “It’s essentially ready now for us to turn over and say, ‘Who’s interested?’”
The company already has garnered attention from “fairly significant” national firms, Marcus said.
Safer Technology Solutions joins a growing rank of startup companies across the country vying for large payouts from automakers and suppliers seeking autonomous and semi-autonomous technologies.
In March, General Motors inked a deal to acquire Cruise Automation, a San Francisco-based autonomous vehicle technology firm. The company is known for its work in aftermarket kits to add autonomous capability on Audi A4 and S4 vehicles. The deal was reported to be worth more than $1 billion, according to Fortune Magazine.
While some startups have successfully spun off their technologies and raked in large profits, Wallace at the Center for Automotive Research believes that kind of risk-reward proposition will be limited to a “vast minority” of companies.
“It’s the usual startup syndrome,” Wallace said. “There’s a small percentage that will be really successful. It’s a bit of a gamble, but for those companies that have the right secret sauce and the right technology, they’re going to be doing very well.”
A MARKET FOR AUTONOMY
Outside of startup companies, established suppliers are also busy integrating autonomous technology into their product portfolios.
Sources point to Zeeland-based Gentex Corp. (Nasdaq: GNTX) as a leader among automotive suppliers in West Michigan in developing autonomous technology. The manufacturer of rearview mirrors carved a niche for itself by taking a relatively simple product and integrating into it a host of semi-autonomous driver-assistance technologies, including lane-departure and forward-collision warnings.
For its part, Gentex seems eager to continue on that strategy. The auto supplier projects it will spend between $152 million and $160 million combined on engineering, research and design (ER&D) expenses and selling, general and administrative (SG&A) costs in the 2016 calendar year, Senior Vice President and CFO Steve Downing told analysts in a January 2016 conference call.
The expenditures “represent continued industry-leading investment in research and product development,” he said during the call.
The auto supplier increased spending on new product development by approximately $4 million to $88.3 million in 2015, according to filings.
Likewise, Southfield-based DENSO International America Inc. in April acquired New Mexico-based TriLumina, a manufacturer of semiconductor laser technology focused on improving LiDAR and driver-monitoring technologies, according to a statement. DENSO manufactures air conditioning and engine cooling components from its facility in Battle Creek.
Wallace thinks the moves by Gentex and other auto suppliers to develop autonomous technology represent the only way for those companies to stay relevant in the near future. Even suppliers of steering and braking components potentially will need to adapt their products to fit autonomous vehicles, he said.
“I think you either pursue autonomous technology, or you won’t exist in the car industry,” Wallace said. “There are still people that provide brakes and things like that, but even those technologies will be evolving to account for different operations.”
The push for autonomous vehicles also transcends the traditional automotive industry. Technology companies such as Google, Apple Inc., and Uber Technologies Inc. are also investing in autonomous vehicles, creating even more opportunity for startups and suppliers developing cutting-edge technology, sources said.
ESTABLISHING A HUB
Economic developers and state officials also are eager to capitalize on self-driving vehicles by establishing Michigan as hub for autonomous technology development and testing.
“It’s really a sense of urgency that the industry is changing drastically and there are a lot of places in the world that want to help the industry get where it’s going,” said Doug Rothwell. “We want to make sure that happens in Michigan rather than somewhere else.”
Rothwell serves as the president and CEO of Business Leaders for Michigan and sits on the board of the American Center for Mobility, a $80 million project aimed at converting the 335-acre former General Motors Willow Run Powertrain Plant in Ypsilanti Township into a testing center for autonomous technology.
The Willow Run project comes on the heels of the University of Michigan’s decision last year to open a $6.5 million autonomous vehicle testing facility, dubbed Mcity, in Ann Arbor.
Automakers are selecting strategic sites across the country to establish mobility research hubs. Toyota announced earlier this month that it would build a research center for autonomous vehicles in Ann Arbor as part of a larger $1 billion investment in autonomous technology. The Toyota Research Institute will coordinate with researchers at the University of Michigan on artificial intelligence, robotics and material sciences, according to a statement.
Toyota opened similar research facilities earlier this year in Palo Alto, Calif. and Cambridge, Mass.
“Our main completion isn’t with Ohio or Indiana,” Rothwell said of Michigan’s role in automous technology. “It’s with places like California and the Carolinas in terms of the investments that we’re seeing. I think lawmakers get that we’re in some degree of competition here with other places for being the focus of this new mobility industry. We can’t take the fact that we have the automotive center for granted.”
ROADBLOCKS AHEAD
Despite the rapid development of the technology, autonomous vehicles still face roadblocks before being fully commercialized — the largest of which is cost, said Wallace of CAR.
Current autonomous vehicles may have upwards of $200,000 of specialized equipment on them, putting them out of range for the majority of consumers, Wallace said.
However, it will be those startup companies that will drive the prices of autonomous vehicles to fit the budgets of average car buyers, he said.
“It’s going to be the startups that make the next generation of LiDAR come down in price,” he said. “They’re going to work in simulation environments and find OEMs of Tier Ones to develop the next generation of sensors.”
