Is Delphi Automotive About to Take On Uber Technologies?

By John Rosevear Markets Fool.com

Giant auto-industry supplier Delphi Automotive (NYSE: DLPH) is gearing up to launch an automated ride-hailing service in at least two cities, one in the U.S. and one in Europe.

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Automotive News reports that the company has previously identified Boston, Pittsburgh, London, and Luxembourg as possible sites for its service, and that it expects to announce its decision sometime this month.

In addition to the two cities it will select this month, Delphi is currently gearing up to launch a limited self-driving shuttle service in Singapore.

Delphi has been using modified Audi SUVs to test itsself-driving technology. One drove itself acrossthecountry in 2014. Image source: Delphi Automotive.

Automated? As in self-driving?

Yes. Delphi, which supplies parts and systems to many major automakers, has been working on self-driving technology for years. Two years ago, it showed off its work with a (mostly) self-driving Audi that (mostly) drove itself across the United States.

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Delphi's technology has advanced considerably since then. The company is working with Israeli driver-assistance specialist Mobileye (NYSE: MBLY) and chip giant Intel (NASDAQ: INTC) on a complete self-driving system that it expects to begin offering to its automaker clients in 2019.

So what is this ride-hailing program about?

Earlier this year, ride-hailing giant Uber Technologies began running a pilot program in Pittsburgh in which a small number of vehicles equipped with Uber's prototype self-driving technology began offering rides to Uber customers. The goal of Uber's program is to use the real-world experience to help refine its technology -- and also to showcase it.

Delphi appears to be thinking along similar lines, perhaps with a little more emphasis on the showcase aspect. Tech-oriented observers and analysts have tended to dismiss Delphi's self-driving efforts out of hand because the company is an old Detroit player, not a Silicon Valley darling.

I think in addition to racking up real-world miles and experience, Delphi wants to show that it can be a leader in the emerging self-driving space. And if its decision to enter the ride-hailing arena gives Uber (and those analysts) something to think about, so much the better.

Incidentally, speaking of showcasing, Delphi and Mobileye are planning to demonstrate the current iteration of their system at the Consumer Electronics Show (CES) in Las Vegas next month.

Can Delphi really compete with Uber and Google?

On technology? We'll see. But if Delphi can develop and perfect more or less competitive technology, it has something very big going for it that the Silicon Valley entrants don't: It's already an established and trusted auto-industry supplier. It knows how to meet automakers' durability needs and navigate the complex web of regulatory requirements. As with manufacturing, these aren't core Silicon Valley strengths.

Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) Google Self-Driving Car Project has been visibly racking up miles and real-world experience for years. The project's current leader, John Krafcik, is an auto-industry veteran who understands what automakers need. But the company doesn't seem to be rushing its system to market -- it's not clear when (or whether) it will -- and it's not clear whether Google will insist on ownership of the data collected, which could be a deal breaker for the big automakers. (Delphi and Mobileye plan to pool and share the data collected by their system.)

Meanwhile, Uber doesn't seem to be developing its system with the idea of selling it to automakers. Uber's goal appears to be to create a system that can be retrofitted to regular cars, with the goal of eventually automating its ride-hailing operation.

I don't think that Delphi is planning to launch a major global ride-hailing business to compete directly with Uber. But it might use the experience to help an automaker client launch one.

What's next for Delphi's self-driving effort?

We'll know more when Delphi officially announces its pilot ride-hailing programs, likely within the next couple of weeks. And we'll learn a lot more about the system, and the company's plans to test it and bring it to market, after Delphi's demonstrations at CES next month.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Rosevear has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). The Motley Fool recommends Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.