For anyone who hasn’t been paying attention, this week has been filled with news surrounding the burgeoning, and potentially lucrative, self-driving car industry…
To kick things off on Tuesday, Alphabet Inc. (NASDAQ: GOOG) officially spun off its self-driving car project into its own company, which is being branded as “Waymo.” Led by project CEO and ex-Hyundai executive John Krafcik, Waymo will be aiming to implement its technology in trucking, logistics, and even personal transportation.
If Alphabet’s ambitions to monetize autonomous vehicles weren’t already clear before, there’s no denying them now. As Krafcik told media outlets this week, “We are a self driving technology company.” And as Google once did with Android, it plans to market the software that hardware (automotive) companies will come to rely on.
On Wednesday, ride-hailing firm Uber began testing its own self-driving vehicles (outfitted Volvo XC90s) on California roads this week, only to be halted by the California DMV for not having the proper testing permit. In a statement regarding the matter, the DMV revealed that 20 other companies have already been approved to test automated vehicles in the state — Uber not being one of them.
Meanwhile, Uber’s self-driving cars in Pittsburgh have been traversing public roads without a hitch.
But the big news this week was something that didn’t grab as many headlines as Uber and Google have managed to do. While certainly less compelling from a mainstream standpoint, this particular development is the one investors should be getting excited about…
Cars That Talk… But Not to You
Earlier this week, the National Highway Traffic Safety Administration (NHTSA) issued a proposed rule that would advance the deployment of autonomous vehicles, specifically by allowing cars to communicate with each other.
According to the NHTSA, the proposed rule would require automakers to include V2V, or vehicle-to-vehicle, technologies in all new light-duty vehicles. Essentially, the rule will require all new cars to “speak the same language” through a standardized messaging and communication system.
These vehicles won’t just talk to each other, though — they’ll talk to their surrounding environment as well. The Department’s Federal Highway Administration now separately plans to issue guidance on V2I, or vehicle-to-infrastructure communication. This means the cars of the future will talk to objects like traffic lights, stop signs, and work zones to improve safety and mobility.
By helping vehicles talk to each other (and to infrastructure), the NHTSA is proposing that V2V will prevent “hundreds of thousands” of crashes every year. The claim is not too far off from a recent McKinsey & Co. report, which forecasts that self-driving vehicles could eliminate 90% of all auto accidents in the U.S., ultimately preventing up to $190 billion in damages and health costs every year.
The V2V rule has been in the works for over two years, with the NHTSA giving advanced notice back in August 2014. The current proposal, though, now gives us long-awaited clarification on what will be expected of automakers in the years to come.
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The Language of Driverless Cars
While it’s been debated for years exactly how cars should communicate with one another, the NHTSA has finally affirmed one particular technology in its rule proposal this week: dedicated short-range communications, or DSRC.
V2V devices can use DSRC to transmit a wide range of data, including location, direction, and speed, to nearby vehicles (up to 1,500 feet, depending on conditions). That data is updated and broadcast up to 10 times per second, helping to identify risks and provide warnings to drivers. Vehicles that contain self-driving technology such as automatic emergency braking or adaptive cruise control would also benefit immensely from the use of DSRC.
Most importantly, DSRC and V2V in general offer a major advantage over today’s driver-assisting sensor systems in that the technology is not limited by line of sight. A camera, radar sensor, or light detection sensor can’t see through vehicles or around a corner, but V2V can provide better situational awareness for both human drivers and automated driving systems.
The proposed V2V rule is expected to become the Federal Motor Vehicle Safety Standard (FMVSS) 150 within a year of publication. If the rule makes it to the FMVSS stage with no major changes, all manufacturers will be required to install DSRC radios into new vehicles by some time around 2020.
The standard, however, could begin phasing in as soon as next year.
Tomorrow is Too Late
General Motors already plans to install DSRC radios in its 2017 Cadillacs, while other automakers are expected to follow suit.
Of course, if the proposed rule becomes standard, that’s going to be a big win for DSRC module manufacturers. According to Navigant Research, global revenue from DSRC-based V2X (vehicle-to-external communication) systems is expected to surpass $36 billion by 2025. No doubt this is going to be a huge opportunity for investors positioned in the right companies.
Better yet, though, DSRC is just one of many technologies expected to see a boon from driverless car tech. From sensors to cameras to terrain mapping systems, the industry is filled with products and companies poised to ride the automated vehicle trend.
Until next time,
Jason Stutman
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