Executive Summary
The full report can be downloaded here: https://drive.wen.fan/self-driving-report-feb-2018.pdf
There is fierce competition in the self-driving software industry.
Numerous new entrants joined the competition during the past three years. Companies compete by differentiating their solutions in sensors, maps, algorithms, car integration modes, and application scenarios. To balance between risk and economic value, new companies are starting to specialize in areas such as sensing or mapping, as these technologies can be adapted to use in other industries, and can be commercialized quickly.
Self-driving system software companies have little chance to become a new unicorn.
On one hand, the self-driving software industry is highly competitive, and companies are incentivized to create a high barrier to entry. On the other hand, it is highly likely that the Android-like platform model will not work in the self-driving industry because the self-driving platform will not be as open as Android due to security reasons. It is unlikely that a provider of self-driving car technology will be able to establish a lasting competitive advantage on the basis of technology alone. In the end, most self-driving software companies will either be acquired by automakers (or auto parts makers) or disappear.
Becoming an automaker or mobility service operator can be good options for these companies.
The self-driving technology will fundamentally change the auto manufacturing and mobility service industry. Start-ups such as NIO and Xpeng are challenging giant automakers by outsourcing production to small automakers, adapting to changing market conditions, and providing more creative products and services. However, these business models have not yet been proven. Other companies, such as Voyage, are looking for opportunities to operate taxi fleets themselves. New entrants to the self-driving technology industry still have the opportunity to beat Uber by differentiating their service and/or focusing on a new market.
Companies need to consider starting from a vertical market to secure a healthy cash flow.
Given the high uncertainty in the self-driving industry, self-driving software companies may need to quickly commercialize the technology. However, this is always difficult for start-ups. Focusing on a vertical market can be a good strategy before building a universal application. These markets can include providing self-driving transportation service on highways or providing taxi services in private communities. By doing this, software companies can collect more data to refine their algorithms and secure a cash flow through the quick commercialization.