How Long Until I Get My Driverless Car?

By John Rosevear Markets Fool.com

Autonomous cars have been the buzz of the energy and tech sectors for years now, but how close are we as consumers to actually having fully autonomous cars in our driveways?

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In this week's episode of Industry Focus: Industrials, analyst Sean O'Reilly talks with Motley Fool senior auto specialist John Rosevear about the state of autonomous driving tech today, and when consumers will start to see the fruits of the industry's labors.

Tune in to find out what the different levels of automation are and why they matter; where companies like Tesla(NASDAQ: TSLA), Ford(NYSE: F), and Fiat Chryslerfit into the story; where Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) Waymo and Apple's (NASDAQ: AAPL) alleged car project seem to be heading; and more.

A full transcript follows the video.

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This podcast was recorded on March 2, 2017.

Sean O'Reilly: Welcome to Industry Focus, the podcast that dives into a different sector of the stock market every day. Today isThursday, March 2, 2017, so we'retalking about energy, materials, and industrials.I am your host, Sean O'Reilly, and joining metoday via phone isMotley Fool senior auto specialist, Mr. John Rosevear. Good morning, John!

John Rosevear: Good morning, Sean!How are you, today?

O'Reilly: Extremely well. It'sgood to hear your voice. It's been awhile,a month or two, since we last had a podcast, and I missed you, buddy.

Rosevear: Yeah,it's been a few weeks.

O'Reilly: I had to get you in here to answer an all-important question.

Rosevear: What's the question?

O'Reilly: You'rethe only guy I know who can answer this for me.I hate driving, I live in D.C., it's very tiring,I want to know when I'm going to get my self-driving car.

Rosevear: Well, itdepends on what you mean by get, and reallydepends on what you mean by self-driving,[laughs] unfortunately.

O'Reilly: I'm not touching the wheel in my driveway.

Rosevear: Let'sback up and define some terms here. This system of classification for things that assist drivershas become pretty universal. It was developed by the Society of Automotive Engineers in the U.S. The U.S.government has adopted it,other governments have adopted it, it's the way all automakers talk now. Theycategorize it in six levels that are helpfully numbered from zero to five. A level zero system, there's no automation, the driver does everything. This might even include warning systems like lane departure warning. But, the driveractually has to do everything. Level one is when you get somebasic level of driver assistance,assistance that parallel parks for you,that kind of stuff. That's a level one system.

O'Reilly: Doesthat include anti-lock brakes?I'm surprised that's on here.

Rosevear: That's...

O'Reilly: Eye of the beholder?

Rosevear: Thedriver is still executing that. They count that as an intervention system. It's when the car decides to break for you thatit starts to become assisted. Theseemergency stopping systems that they have now wherethe radar is on the front of the car, the levels one through five require some level of sensing what's going on around a car. So, yeah, these parallel park systems where the car spins the wheel for you and backs into the spot, that kind of thing, that's a level one. Level two is where itstarts to get interesting. This is the system where you're on the highway and the traffic jam assist systems, maybe theearliest versions ofTesla's autopilot, where you can kind oftake your hand off the wheel under certain circumstances, and the car will maintain and adjust its speedrelative to the cars around to you, and it willkeep itself in its lane. It's doinga little steeringand a little accelerating and decelerating on its own. But there still has to be a human driver, the human driverhas to be ready to grab the wheel. In fact, a lot of these systemsrequire you to actually touch the wheel every minute or two,or something like that. Level threeis when it kind of gets into self driving. This is a system that can driveunder certain conditions,we might say highway driving, this is where Tesla'sautopilot is starting to go, this is where some of the systems,GM's (NYSE: GM) Super Cruisethat will come out on Cadillac soon,this is where it ends up, level three.

O'Reilly: Super Cruise?[laughs]

Rosevear: That'swhat they call it. That'swhat they've been calling it for a few years,I'm not completely sure that'swhat they're going to call itwhen it comes to market. Anyway, the gist here is, it's self-driving until suddenly it isn't, thedriver has to be ready to grab the wheel. That makes it a littletricky. We'll talk about that in a minute.

O'Reilly: The Motley Fool's Dan Sparksdid that article about a year ago,he lives out in Colorado andhe has a Tesla, how far did he get, 90 miles?I can't remember, but,I don't think he touched the wheel on the freeway with that thing.

Rosevear: Tesla's official instructions withthe original system where you're supposed to touch the wheel regularly, they considered it an advanced level two system. I think now they're into level three territory. The border here is a little bit fuzzy. The border to level four is not fuzzy. Level four is, the car is driving itself, period. Itdoes not need you,but it's limited. Usuallywhat it means is it's limited to an area that's been mapped, we say it's been geofenced. Thesesystems tend to depend on veryhighly detailed 3D maps that show stuff thatnormal maps don't show, likeexactly where the curb is within a couple inches and so forth,so the car can navigate precisely,especially on a city street. So, it's full self-driving, you don'tever have to touch a steering wheel,but it only works where the car has a map. Level five -- and we'llget back to this in a minute -- is the full-blown thing. It'lldrive itself wherever you wantunder any conditions. If it's snowing,it'll go up a mountain,whatever, anything.

So, what we'retalking about in the near future is level four, a car that will self-drive itself. This is coming soon. But it'slimited by its maps. The idea is, gradually the maps will expand over time and you'll be able to drive --

O'Reilly: Are therecities that are being mapped right now?I'm actually surprised to hear this.

Rosevear: Yeah,Pittsburgh is being mapped. This is where Uberis doing their testing,a lot of it. This is actually where Ford's new company they created as a start-up with a veteran of Uber and a veteran of Google's self-driving car project running it. This is basically Ford'ssoftware team for self-driving, and they're inPittsburgh. There's been a lot of mapping done,interestingly, inPittsburgh, because the artificial intelligence lab atCarnegie Mellon isthe source of a lot of the research that went into this, so,a lot of the people are there. There's somemapping going on in San Francisco. I know GM's cruiseautomationsubsidiary is doing testing of level four assistance inSan Francisco, so they have mapping going on. Then, there are companies mapping all over the place. Tesla, I think, is automating some of this mapping with thesensors on their existing cars. Acompany calledMobileye(NYSE: MBLY)isgoing to start doing mappingwith sensors on their customers' cars, these are sensors for level two systems but they can help do the mapping for level four. This is going to start very soon, probably next year for Mobileye. There areprivate companies trying to do this, too,hoping to be able to sell the maps to the automakers or whoever. And, of course, the big wild card in this is, of course, Waymo. Google's been mapping for years and years.[laughs]

O'Reilly: You've seen the cars? They lookridiculous, they have the pole and they have the ball of cameras on the top, and they just drive around all these cities. That's how I can see what mydentist's office looks like from across the street. They're mapping cities with that, too?

Rosevear: Yeah. I think everybody is. And it's not justmapping for Google Maps, it's mappingat a much more fine level of detail, where is the curb, where is thespeed bump, and so forth, so the car knowswhat to expect as it's driving. The idea is, a map is a fallback from its sensors. If it's dark out,if it's foggy, if the lighter system is beingbuggy for whatever reason,you can kind of fall back on the maps. Because these are safety systems,there has to be redundancy built in. That's the thinking.

O'Reilly: So,when is this stuff coming out?

Rosevear: Good question.Tesla constantly does these upgrades, and they'll break into level four at some point. IfI had to guess, I'd say 2019. ButI don't know for sure. They may not even know absolutelyfor sure when they'll be ready to ship it. There's also an interesting question there that with their owners of their current models, they've been shipping stuff that maybe has some bugs still in it for the owners to bang on. Andbecause Tesla owners tend to be early adopter types, they're mostly cool with that. AsTesla moves into the mass market with its upcoming Model 3,something else we've talked about,I don't know if they're going to tighten it up a little bit. They might. We'll see. Butthat might push that data off. But,anyway, thispartnership of giant auto supplierDelphi, Mobileye, which is amachine vision specialistthat has done a lot of work around--

O'Reilly: Andbut they are publicly traded, right? For our listeners.

Rosevear: They are. The ticker there is MBLY. Look them up,because if you want a pure-play on self-driving,that's as close as it gets. The thirdcompany in this isIntel,which is designing the processors. They're working together on a level four system. We'vetalked about this before. They will have this available to any automaker who wants it by the end of 2019, they say. Now, thecars are going to ship in 2019. These things areincorporated as the cars are developed. So,probably late 2020, early 2021,people will be shipping cars with this system in, butthose cars may not go to retail.[laughs]

O'Reilly: What?! Will they hang out and not do anything?[laughs]

Rosevear: Here's what,for instance, Ford is saying. Ford says, "We'regoing to mass produce a level fourvehicle starting in 2021." Great. Then, they say, "Yeah, but we're not going to sell it at retail. This is going to be for car sharing use in cities and ride hailing services, Lyft and Uber and so on." It's because of the maps. Theyonly want to sell it where they have the maps.CEO Mark Fields at Ford has said, "We'renot even going to give it a steering wheel in this," soobviously it has to have the maps. Again, as the maps expand, there'll be more. Ford is saying right now that they think they'll have level four functionality in their retail vehicles 2025-ish. But they always say that, Bill Ford,executive chairman of Ford, always says, "We throw out these dates,but it's always earlier than I expect." So, we'll see. Right now they're saying 2025. So, yeah, he says, "This stuff moves much faster than we expect." There'salso some other stuff going on. The thing toemphasize here, I should back up a little bit, not all the automakers, not all the tech companies talk about what they're doing. There will be surprises here. This is just, what has been announced, what we have seen,what we generally know is coming.

O'Reilly: Yeah,once you go public with something you get held to itin some capacity, and nobody wants to get egg on their face.

Rosevear: Right. And GMoriginally said they'd launch Super Cruise in 2016 --

O'Reilly: Theyneed to get a different name for that.[laughs]

Rosevear: Yeah, OK. They're a level three system. They came out a while back and said, "Wait a minute, we're not happy with it, we'regoing to do more work and make it more advanced. We'renot going to set a firm date, but we think late 2017-18,probably around there." Butagain, they are not holding themselves to a firm date on that. In fact, they'renot holding themselves to a firm date on a lot of this stuff. Mary Barra's thing is, "We'll ship it when it's ready." Butwhat we do know is that GM is planningto actually start building a whole lot of level fourvehicles, reportedly in the thousands. These will be the electric Chevy Volts. They will be fitted with prototype level foursystems,and they will go into this massive test with Lyft inseveral different cities. So,when will you get your level four car?

O'Reilly: Which is why they invest in Lyft.

Rosevear: Right.They own 9% of Lyft, it'ssomething like that. It's a major investment,certainly, for GM.But, when do you get yourself a driving car? If you're in D.C.,you might get one in several months from now or a year from now, when you summon Lyft with your smartphone and a Chevy Volt comes. Uber isalready doing this on a tiny scale in Pittsburgh. They have 8 or 12 cars or something that areprototype self-driving vehicles in their fleet. With these things,there are two engineers on board. One is ready to grab the wheeland the other one is taking notes on everything that'shappening with the system. And it may be the same deal with these GM Lyftself-driving vehicles. So it might not seemall that exciting because there's somebody in the front seat,but the car is driving itself, is the idea. This is a way to rack upa whole lot of test miles quickly,if you have a whole bunch of these things out there, you know?

O'Reilly: Yeah.I can't wait to see all these Lyftdriverless cars handle all the roundabouts in D.C.,that'll be a treat.

Rosevear: Yeah, they'll teach them. We call them rotariesup here in New England,we have lots of them too.It'll be interesting to see how they handle Boston,which is colonial era streets in some areas of town.[laughs]

O'Reilly: Yeah, they'remade for horses, not driverless cars.

Rosevear: Yeah. Well,they were made to walk in, or cow paths,definitely not driverless cars. But, there's other stuff in here, too. The wild card is Waymo, which is the Alphabetsubsidiary that used to be the Google Self-Driving Car Project and has now been set up as a company to go into business andcommercialize this in some way. Who will partner with them? They had this little deal withFiat Chryslerwhere Chrysler built them someChrysler Pacifica minivans as test vehicles that took on their latestprototype system. They've beentalking toHonda, reportedly. But of course, there's a certain view in the auto industry that a deal with Waymo is a deal with the devilbecause Google will want all the data. And then you're anAndroid phone maker, and Google'smaking all the money. That is a great fear. I think every auto CEO in the world is mindful of theexample of the phone industry.[laughs] Theydon't want to give up the data.I think that is actuallya lot of the selling proposition of the Delphi-Mobileye system,this is a system developedwithin the established auto industry supplier structure. We'llshare the maps among our fellow automakers and so forth, but we're not selling the data to Google.[laughs]

O'Reilly: Whatdo you think has been going on there? Correct me if I'm wrong, but Google has thosetiny little white go-kart looking driverless cars for years. The laymen,we haven't gotten a hint of themtrying to make a buckoff of them at all.It's weird.

Rosevear: They hired, a while back,and executive named John Krafcik. He had been the president ofTrueCar, and before that,he had been in the business for years. He was with several automakers, inmanagement capacities,executive capacities. He's a guy who knows the business, a good guy, smart guy. His job is to lead Waymo and find a way to bring this stuff to market somehow. He's been out there talking to automakers. Heactually did a really big presentation at theNorth American International Auto Show inDetroit in January --I was going to say last month, but it's March now. He wastalking about where their system isand so forth. They have asolid prototype level four system.I think he was there, in part, fishing for automakers who might want to haveconversation. It's possiblethose conversations have happenedand nobody is talking about them. The ones that have made itinto the media are Honda and, of course,Fiat Chrysler,which is a much more overt thing, because thelatest test vehicles are allChryslers.

O'Reilly: Wedon't have this as a note, sofeel free to tell me you don't know a ton about this,but I'm sure all of our listeners areon the tip of their tongues with this, they want to hear, what is Apple up to? They have that big plan,and I've got a push notificationfromThe Wall Street Journala year ago thatApple was going to build a car within the decade, blah blah, then they pulled back on it, they're doing testing again. What is Tim Cook scheming right now?

Rosevear: Good question. Yeah,I remember when that Wall Street Journal thing came out.

O'Reilly: You gotthe notification too, I'm sure.

Rosevear: I did,and I actually poked a few sourcesand ended up writing a big piece for The Motley Foolfirst thing on Saturday morning after that broke, sort of, what does this mean,can they actually do it, that kind of thing. And the answer was,Apple has so much money that, of course, they could start a car company,the question is, do they want to?

O'Reilly: Yeah, I remember you talking about that.

Rosevear: Right. They can throw money at it. The full boat, it's about $10 billion to get to whereTesla is where they have a factory and they're banging out cars and it's really high level of quality and so forth. Full boat. That's Tim Cook'slunch money these days.[laughs] Theircash load is unbelievable. They can do anything. Thequestion is, would they want to? The margins in the car business, by Apple'sstandards, are pretty lousy. A luxury car businessmight make an operating margin of 10-12%. If you'rePorsche, you might make 16%. That's kind of the upper limit.

O'Reilly: So,is it possible thatGoogle and Apple wind updropping the brains in these cars and calling it a day? Google already, they must have tons of data on these cars operating.

Rosevear: Google has made it clear, John Krafcikcame out and said, "We'renot building cars, we'renot going to build a car factory, we are not building cars. We'relooking for partnerships, we are not building cars."Apple hasn't said anything, of course. Officially, this program doesn't even exist. But the word was,a lot of the people who might have been on the actual build-a-car side of the business have been let go. People working on electric self-driving cars are in very hot demand these days. So,none of these people are wanting for employment. But it was thought thata lot of those folks were let go,and they really ratcheted down the ambitions of the program. They may be aiming to do something where they come out, like Waymo, and offer a system that Apple-izes aself driving car built by somebody else. It'spossible that they will find an automaker to partner with, and maybe offer that as a deluxe ride hailing option. My thought whenthey were originally talking about this was that they were going to build the deluxe Apple version of robot Uber, whereit's a little bit more money but it's a nicer car, and itrecognizes all your Apple devices and it's this seamless experience, it sees your iPhone and itautomatically sets your seatand your climate andyour music and everything else and all this stuff,it takes exactly where you want to go,and it's just a subscription model,$500 a month for the Apple Car service. That'swhere I thought they were going to go. Others disagreed. Some of my fellow Fools who are also very close watchers ofthis kind of technology andparticularly close watchers of Apple thought they might actually build a car for retail Tesla-style.

O'Reilly: Cool. We'reabout out of time, John. Iwant to give you the last word. When am I magically going to get mydriverless car in my driveway?

Rosevear: Ifyou want a Tesla,you might get it by the end of the decade. If you want a car from one of the bigger automakers, it'sprobably a few years beyond that. Somebody may surprise us and have a level four car out by 2020 or 2021 that has a fairly big map. But I'm thinking it might beover the next couple years after that that thesestart to be available for retail. I suspect the first ones that come out, it will be an expensive option on a luxury car.

O'Reilly: Awesome. John,I cannot thank you enough,once again, for your time.

Rosevear: It'salways a pleasure.

O'Reilly: I have to imagine that as thiscontinues to ramp up,this will not be our last show about this topic.

Rosevear: Oh, heavens no. We'll betalking about this for several years to come. It's a big deal.

O'Reilly: Awesome. Well,have a good day, John!Thank you, again!

Rosevear: All right. Take care, Sean!

O'Reilly:Bye. That's it for us, folks. Besure to tune intomorrow for the Technology show. If you're a loyal listener and have questions or comments, we wouldlove to hear from you, just email us at industryfocus@fool.com. Asalways, people on this programmay have interests in the stocks that they talk about,and The Motley Fool may have formal recommendationsfor or against those stocks so don't buy or sell anything based solely on what you hear on this program. For John Rosevear,I am Sean O'Reilly, thanks for listening and Fool on!

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Rosevear owns shares of Apple, Ford, and General Motors. Sean O'Reilly has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, Ford, and Tesla. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool recommends General Motors and TrueCar. The Motley Fool has a disclosure policy.