Layoffs, sales, huge losses, the first cold wind of autonomous driving blowing in the Western Hemisphere

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Author: Tian Xi

" Starting this year, the industry environment has changed suddenly... "

Chen Mo, the former chairman of TuSimple, the first autonomous driving company, said in an interview with the media in July that he summarized the market situation in the United States in the first half of the year and unexpectedly successfully predicted the industry trend in the second half of the year.

At first, Tucson suddenly announced the sale of its Chinese business in March, and the team underwent major adjustments, and Chen Mo also left the company.

Then, in June, Tesla closed its autonomous driving systems department in San Mateo, California, and cut about 200 hourly jobs. Not long after, the star company Argo AI also announced that it would lay off about 150 employees.

The latest news is that Aurora, which has been listed for less than a year, is seeking to sell part or all of the company. You know, in Aurora's prospectus last year, it proudly listed itself as one of the three forces in the autonomous driving world, along with Waymo and Cruise...

There is no doubt that things are changing, and the reason behind it is that the industry is experiencing a round of capital ebb:

On one hand, the cost of capital is getting higher and higher amid the Federal Reserve's interest rate hikes, and on the other hand, autonomous driving companies are increasingly burning money. Investors now choose to stand aside and witness the "grand occasion" of an industry in which both the good and the bad are mixed together.

Autonomous driving companies are powerless to do anything about this. Before they achieve breakthroughs in technology and commercialization, they can only rely on external transfusions. And when this process is suddenly interrupted, they can only choose to survive by cutting off their own arms, or even sell themselves off.

"Winter is here," an industry insider lamented. It is worth noting that this cold wind, which seems to have originated in the Western Hemisphere, has also reached China. Not long ago, Ren Zhengfei, the founder of Huawei, was the first to feel the cold and proposed to pass it on to everyone.

2022 is destined to be an unprecedentedly difficult year for the autonomous driving industry.

01

Autonomous driving can be called a money-shredding machine.

Cruise is spending $5 million a day

In March, TuSimple announced that it would sell its Asia-Pacific business (mainly China business) for US $ . In the eyes of the outside world, this was a deal that was forced to be reached in order to comply with US regulations.

Since TuSimple's IPO in April last year, the Committee on Foreign Investment in the United States (CFIUS) has been investigating TuSimple on the grounds that it has business in China. It finally reached an agreement with TuSimple in February this year, requiring the latter to transfer some technical supervision rights of its autonomous driving truck business to relevant US departments, hold regular meetings and report to the Committee on Foreign Investment in the United States.

Under such circumstances, it would be reasonable for Tucson to sell its Asia-Pacific business directly to avoid disputes. However, Chen Mo said there was another reason for this move: lack of money. "The purpose of selling the Asia-Pacific business is to allow Tucson to recover funds to support the development of its US business."

It is understood that Tucson has been burning money at an alarming rate since its listing. Taking its latest second quarter report as an example, it achieved revenue of US$2.594 million and recorded a loss of US$ 111 million (equivalent to approximately RMB 759 million) , of which RMB 593 million was invested in R&D . If calculated based on 90 days per quarter, it consumes more than RMB 6 million per day .

As a listed company, Tucson can theoretically seek to raise funds in the capital market. However, its stock price has plummeted since its peak, and its market value has dropped by 80%. Chen Mo said frankly: "It is impossible for us to raise money in the market."

Like Tucson in financial troubles, star company Argo AI.

This is an autonomous driving technology company invested by Ford and Volkswagen Group. It was founded in 2016 by two technical experts with backgrounds in Google and Uber. It received a $1 billion investment from Ford when it had only 12 employees, and then received a $ 2.6 billion investment from Volkswagen in 2020 .

On July 7, Argo AI announced the layoff of approximately 150 employees. Although a company spokesperson immediately stated that the layoffs would not slow down plans to develop commercial services for the autonomous driving system, it still made the outside world feel a chill in the autonomous driving industry.

Now, this chill has spread to the second half of the year. It was recently reported that Aurora, a self-driving company that was listed through a SPAC backdoor at the end of last year, will cut costs through layoffs and reduced benefits to overcome the current difficulty of making ends meet.

Aurora CEO Chris Urmson said he is considering selling high-quality assets such as its lidar business, or selling the entire company to Apple, Microsoft or other potential first-tier automotive companies.

According to media reports, Aurora has burned through approximately $230 million in cash since its listing, and its stock price has fallen from a high of $17.77 per share to a recent $1.43 , a drop of more than 90% .

However, compared with the real "big money burners" Cruise and Waymo, Aurora seems "a little inferior".

General Motors' latest financial report shows that its self-driving subsidiary Cruise had a revenue of US$25 million in the second quarter, but lost as much as US$540 million , equivalent to US$5 million per day .

If the entire first half of 2022 is included, the cumulative loss will reach US$900 million, which is US$300 million more than the same period last year .

Waymo is not far behind. The second quarter financial report for fiscal year 2022 released by Google's parent company Alphabet shows that OtherBets (including self-driving car division Waymo and life science division Verily) lost $ 1.668 billion this quarter .

Although there is no direct data, former Waymo employees and other industry insiders estimate that Waymo spends more than $1 billion every year on various aspects.

In the past, it was nothing new for autonomous driving companies to "burn money." According to industry insiders, this was a necessary investment before winning in the future. Different players either relied on parent companies or introduced external financing to make blood transfusions. However, Now, things are starting to change.

02

Technology and business have been hindered one after another,

The capital market is "too tired to sleep"

According to Cyber ​​Automobile, in the autonomous driving mainline logistics track, some companies have met with more than 80 investment institutions this year before they have some clues about financing, and many companies have "already met with more than 100 investment institutions, and they are still..." No whereabouts."

According to Chen Mo, one of the important reasons is that the Federal Reserve has raised interest rates several times, leading to a tightening of money supply in the capital market.

The world's richest man, Musk, also said on Twitter that "the Federal Reserve's sharp interest rate hikes pose a risk of deflation," and sold about 8 million shares of Tesla stock in succession, cashing in a total of US$7 billion .

Since the beginning of this year, most technology companies in the U.S. stock market have been affected by the interest rate hike cycle, and their market values ​​have experienced successive corrections. The decline in autonomous driving companies has been particularly severe. This has made investors who were originally optimistic about this field become hesitant. In order to ensure the safety of their capital chains, they Choose to take less or no action.

Take Mobileye as an example. The company was originally planning to go public this year and was once valued at US$50 billion by the market, making it expected to win the largest IPO in the US stock market this year.

In March 2022, Intel announced that it had secretly submitted a draft Form S-1 registration statement to the U.S. Securities and Exchange Commission, proposing an initial public offering of new Mobileye shares. According to the plan, the funds raised from the listing will be used to increase Mobileye's new business.

However, just half a year later, Mobileye's valuation was slashed by 40%, and Intel estimated that the company's latest valuation was up to $30 billion, far below the initial expectations. As a result, Mobileye's plan to go public was shelved.

According to data from the investment website PitchBook, investment in autonomous driving has declined sharply in 2022. Investment in autonomous driving startups dropped to US$958 million in the second quarter, accounting for less than 10% of venture capital .

The fact that autonomous driving companies have not performed as expected in technology and commercialization this year has further aggravated the wait-and-see sentiment in the capital market.

Take TuSimple as an example. In April, its self-driving truck deployed for testing in the United States suddenly turned left and hit a concrete roadblock. After the traffic accident was reported by the Wall Street Journal, it quickly attracted the attention of local regulators to the safety risks of self-driving.

For this reason, TuSimple stopped testing the entire fleet and conducted an independent investigation. TuSimple co-founder and CEO Hou Xiaodi also said that TuSimple will not commercialize before ensuring that the fleet can operate safely.

Cruise has also experienced a "tumultuous autumn" this year.

Cruise sparked an uproar in May after internal employees anonymously reported to California regulators that Cruise had deliberately concealed potentially damaging problems involving its vehicles and operations, including that its safety reporting system remained in disarray.

In June, Cruise was involved in two traffic accidents again. First, its Robotaxi collided with an oncoming Toyota Prius at a left turn, causing minor injuries to two people.

To this end, Cruise recalled and updated the software of 80 Robotaxi vehicles.

Then within the same month, more than a dozen Cruise self-driving vehicles were parked at an intersection for no reason, causing traffic to be paralyzed for more than an hour. The matter was not resolved until a human driver drove them away.

Afterwards, Cruise responded that it was a "technical problem" that caused the above situation.

Tesla is also making the public increasingly distrustful of autonomous driving technology.

On July 6, a 2015 Tesla Model S drove into the highway rest area parking lot from Interstate 75 south of Gainesville, Florida, and crashed directly into a tractor-trailer parked there. Although it has not been confirmed whether the autopilot function was turned on at the time, coincidentally, the car that was hit was another "white car."

Earlier, according to data from the National Highway Traffic Safety Administration (NHTSA) , more than 200 car accidents in the 10 months ending May 2022 were related to Tesla's Autopilot software.

For this reason, Tesla was deemed by the California Department of Motor Vehicles (DMV) and the U.S. National Highway Traffic Safety Administration (NHTSA) to make false claims about its technology. The California Senate has also passed a bill banning the inclusion of terms such as "autonomous driving" in advertisements for smart driving.

The fact that autonomous driving companies have not yet reached technological maturity has begun to make previous investors anxious. Until now, there has been no significant improvement in commercialization, which has made these people "tighten their pockets."

Aurora recently announced that the time for its fastest commercial self-driving truck to be on the road will still be delayed by one year, to 2024.

Chris Urmson, the company's founder and CEO, explained that the reason behind this is the slow progress of OEM. As commercialization is not as expected, he also said, "It is expected that there will be no traditional financing opportunities of sufficient scale to keep the company alive in the next six months."

TuSimple is facing the same dilemma. Previously, it reached a cooperation with Navistar, the third largest truck manufacturer in the United States, to achieve mass production of L4 self-driving trucks.

However, as time goes by, Navistar has been delaying TuSimple's future mass production of L4 self-driving trucks, from the scheduled 2024 to 2025, 2026...

Chen Mo once directly complained in a media interview that Navistar's autonomous driving mass production progress is too slow, especially in the European and American markets. "Our original commitment to investors was that TuSimple would achieve mass production in Q3 of 2024..."

Waymo and Cruise have some good news on commercialization.

On March 1, the California Public Utilities Commission (CPUC) issued self-driving passenger service licenses to Alphabet and General Motors, allowing their self-driving companies to provide paid passenger services in and around San Francisco.

Previously, Waymo and Cruise were only allowed to provide limited passenger transportation on a test basis in California and were not allowed to charge fees.

However, this can only be regarded as the early stage of commercialization. After all, Robotaxi is currently deployed in not many cities. Taking Waymo as an example, it currently only provides travel services to the public in the East Valley of Phoenix, downtown Phoenix and San Francisco.

In addition, Waymo’s current business model is somewhat tasteless. According to a CNBC reporter's experience in January 2022, Waymo's Robotaxi in Phoenix took 14 minutes to run 5 miles and charged $1 per minute.

Uber is not only much faster for the same distance, but also charges only $ 0.4 per minute .

"The service price of San Francisco Robotaxi will be set at a reasonable and competitive range. At the same time, the free test/paid commercial operation model for limited users will be rolled out in other places." A Waymo spokesperson expressed himself at a meeting of optimism.

In comparison, more people are not so optimistic about autonomous driving. What they are more concerned about right now is how long the long road of "burning money" will continue?

03

The money-burning game enters the countdown:

Without the support of a gold mine, it may need to consider selling itself

As of June 30, 2022, TuSimple had only $1.16 billion in cash on its balance sheet. Based on its 2022 adjusted EBITDA loss of $360 million to $380 million, the company's cash would only be enough to support it for about three years without financing.

At present, Tucson has not started the process of independent hematopoiesis. Data shows that its total number of truck reservations has reached 7,485 , but none of them has yet entered the delivery stage of mass production.

In its prospectus, TuSimple calculated that one truck can generate revenue of US$60,000 a year. When the number of trucks in operation exceeds 5,000, the company will reach breakeven and then gradually achieve profitability.

Aurora directly gave a timetable, predicting that it would not be able to achieve breakeven before 2027. Cruise CEO Kyle Vogt said at a conference on September 12 this year that the company's goal is to achieve revenue of US$1 billion by 2025, equivalent to half of the current annual investment level from General Motors.

The above indicates that autonomous driving companies will have to burn money for at least 3-5 years, and they may not be able to succeed in the end. Some investors cannot wait.

In March 2022, the Vision Fund of private equity giant SoftBank Group sold its shares in Crusie to General Motors for $ 2.1 billion .

Vogt admitted that the autonomous driving industry has shifted from "extreme optimism" to "extreme pessimism." This means that as capital recedes, it is time for autonomous driving companies to seek a way out.

Companies like Waymo and Crusie, which are backed by "Jinshan", don't seem to have to worry too much. Cruise also currently has $3.7 billion in funding and has access to a credit line of approximately $5 billion from General Motors Capital.

At its first-quarter earnings conference, GM said it plans to spend about $2 billion on Cruise in 2022, more than ever before.

Next, GM also promised to continue to provide funding for Cruise to ensure that the latter takes a leading position in the market.

It is understood that after receiving the shares transferred from SoftBank Group, General Motors invested an additional US $ in Cruise in March .

Waymo is also supported by its parent company Alphabet.

Before 2020, Google/Alphabet had been continuously injecting blood into Waymo for 11 years. However, due to the huge investment, they finally began to introduce external financing for the first time at the beginning of that year: US$2.25 billion was raised in March, US$750 million was raised in May, and finally in A total of US$3 billion in financing was completed within 73 days .

Thanks to Alphabet's strong brand effect, Waymo announced in June 2021 that it had completed another round of US$2.5 billion in investment.

Meanwhile, Waymo has also discussed plans to eventually go public to relieve financial pressure on its parent company, people familiar with the matter said.

However, based on the current performance of the capital market, Alphabet will most likely not promote Waymo's IPO in the short term. Instead, it will continue to use the company's profits to subsidize Waymo's huge losses.

The most dangerous are autonomous driving companies without a backer.

As mentioned earlier, Aurora has taken the first tentative step: considering selling itself to an OEM or technology giant.

Chris Urmson, the company's chief executive , said the company could be taken private if it finds a partner capable of providing $1.5 billion in financing. "Given the current share price, we should be an attractive target for anyone looking to own a company in autonomous driving technology."

What is dramatic is that Aurora originally planned to expand its business by acquiring autonomous driving companies, but now it is unexpectedly seeking to be acquired.

In December 2020, Aurora, which was still a startup, acquired Uber's autonomous driving division ATG for US$4 billion, almost like a "snake swallowing an elephant". At that time, Uber was facing huge operating cost pressure, and its ATG department suffered a loss of about US$500 million in 2019.

After selling its self-driving business, Uber's net loss did improve to a certain extent. But now history is repeating itself, and Aurora is facing a bleak moment of being sold as a whole.

Despite this, selling is still a more decent outcome than bankruptcy. If it can be sold to an OEM, it can even be considered a good destination.

As the trend of industry intelligence deepens, autonomous driving is regarded as the "soul" of cars.

Traditional OEMs such as General Motors, Ford, and Volkswagen have all increased their investment in this area. For those OEMs that have not yet begun to deploy, a more feasible option to participate in this wave is to acquire an autonomous driving company, and this is giving companies like A glimmer of hope for struggling businesses like Aurora.

This is how Level 5, the autonomous driving division of Lyft, the “first online ride-hailing company”, completed its “peaceful handover.”

Founded in the summer of 2017, Level 5 also had a glorious past. In 2018, it obtained a license for public road testing in California and accumulated a good amount of R&D and testing data.

However, with the sudden outbreak of the epidemic in 2020, parent company Lyft suffered huge business losses and could not support Level 5's dream of burning money to continue autonomous driving.

In April 2021, Lyft sold Level 5 to Woven Planet Holdings, a subsidiary of Toyota, for US$550 million, saving at least US$100 million in operating expenses each year.

Today, the deadlocked autonomous driving companies are also seeking opportunities to sell themselves to OEMs, whose strong financial resources can help them survive the difficult "winter" of 2022.

A few days ago, it was reported that Geely Holding Group issued an acquisition offer to TuSimple's U.S. headquarters and planned to acquire all shares of TuSimple's Asia-Pacific business. Specific acquisition details have not yet been announced.

04

The cold wind of autonomous driving begins to blow to the Eastern Hemisphere:

Live, have a future

Turning our attention back to China, it seems that China's autonomous driving companies have not yet suffered the same crisis as their counterparts on the other side of the ocean, but if you look closely, they have also experienced some difficulties.

In 2021, the regulatory environment for overseas listings has tightened, and IPO plans such as Pony.ai and Zhijia Technology have failed. The pace of financing has been disrupted, leading to major business adjustments and personnel movements.

Typical examples include Pony.ai’s truck division, which encountered turmoil last year. Pan Zhenhao, the company’s former head of autonomous driving technology, Sun Haowen, head of the domestic autonomous driving planning and control group, and Zhao Ruixuan, vice president in charge of strategic cooperation and financing, left to establish three truck companies each. Autonomous driving companies.

When the time comes to 2022, Pony.ai’s truck business is regrouping: On July 28, Pony.ai and Sany Heavy Truck established a joint venture and plan to start small-scale mass production and delivery of self-driving trucks in 2022.

Behind this, Pony.ai received another blood transfusion: On March 7, Pony.ai announced the completion of the first delivery of Series D financing.

Pony.ai CFO Lawrence Stein said: "The company's financial position is very solid, providing a solid foundation for Pony.ai's development in the next few years until we start the process of large-scale commercialization."

Following the termination of its agreement to list on the New York Stock Exchange via SPAC, changes were also reported for Plus.ai.

In August this year, Huxiu wrote an article titled "TuSimple's "M&A-style" escape and lies" that a source revealed that the trunk logistics platform Manbang Group may acquire the autonomous driving truck company Zhijia Technology.

However, this news has not been confirmed.

In terms of financing, PlusAI set a record of US$420 million in financing in 2021, the largest in the trunk logistics field.

According to recent news, on August 16, 2022, Zhijia Technology and Zhitu Technology completed the first batch of delivery of 100 self-driving heavy-duty trucks for Rongqing Logistics.

Judging from Pony.ai and Zhijia Technology, domestic players seem to have smoothly overcome financial difficulties. However, not long after, on August 22, Huawei founder Ren Zhengfei shouted out the "chill theory" internally, causing the autonomous driving industry to feel cool again.

According to Ren Zhengfei, the next decade will be a very painful historical period, and the global economy will continue to decline. In order to meet the challenges, Huawei will shrink or close businesses that cannot generate value and profits in the next few years.

Coincidentally, intelligent driving is such a business.

At an industry forum on July 7, Huawei Managing Director, Terminal BG CEO, and Smart Car Solutions BU CEO Yu Chengdong revealed that the automotive business is Huawei’s only loss-making business.

He said that Huawei invested more than one billion US dollars in this business a year, directly investing 7,000 people, and indirectly investing 10,000 people. Among them, intelligent driving accounts for the majority. " Seventy to eighty percent is invested in the field of intelligent driving assistance ."

At present, according to Ren Zhengfei's request, Huawei will reduce its scientific research budget and strengthen commercial closed-loop research and development for smart car solutions.

Even a company like Huawei, with annual revenue of 600 to 700 billion yuan, is tightening its investment in autonomous driving business. For those companies that have not yet achieved commercialization and self-sustaining business, the future financial pressure is obvious.

Back to the present, the experiences of U.S. autonomous driving companies have sounded the alarm for domestic peers. Without the backing of a "big tree", according to the money-burning rhythm of companies in this field financing once a year, there are no companies that have raised money yet. It can be said to be very dangerous.

Autonomous driving is not only a competition of technology, but also a game of time. The one who can reach the finish line is not necessarily the one who runs the fastest. Only by surviving now can you be qualified to talk about the future.

This article is reprinted from "Car Heart". The content is the author's independent opinion and does not represent the position of Global IoT Observation. It is for communication and learning purposes only. If you have any questions, please contact us at info@gsi24.com.

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