Nvidia's automotive business growth slows as autonomous driving is delayed

Nvidia's latest financial report shows that the company's automotive business, which continued to grow in the first seven quarters, was discontinued in Q3 2019, down 6% year-on-year. Officials said that the overall weakness of the automotive industry was the main reason for the decline in performance.

Image source: The Motley Fool 

Data from research firm Fitch Ratings shows that auto sales fell in 2018 for the first time since 2009, falling 0.1%, compared with an average annual growth of 4.1% previously. To make matters worse, Moody's Investors Service predicts that sales will fall by 3.8% in 2019, and the situation will improve slightly in 2020, with a decline of around 0.9%.

The decline in sales means that automakers will focus on cost reduction to maintain normal operations, and may temporarily suspend R&D and investment in automotive electronics and autonomous driving. Therefore, for the earlier prediction that autonomous vehicles will be commercialized on a large scale in 2020, the JD Power Survey report shows that the landing node of autonomous driving may be delayed by at least 10 years. In addition, it is expected that by 2034, it will only account for about 10% of the total automobile sales share.

For Nvidia, the continued downturn in the automotive industry has directly led to a lack of confidence in the revenue of its corresponding business. Nvidia is a beneficiary of the explosive growth dividend of automotive electronics. As early as 2016, although the company's automotive electronics chip and system platform business accounted for about 10% of the total revenue, the project's turnover once increased by 63% year-on-year.

In the same year, NVIDIA and Tesla reached a cooperation agreement to deploy the deep learning-based artificial intelligence platform DRIVE PX2 in a number of models including Model X, Model S and Model 3.

Image source | Nvidia Blog 

In 2017, NVIDIA announced that there were 145 autonomous driving car startups in the world, using its artificial intelligence platform DRIVE PX2 and DGX system to achieve front-end real-time analysis and back-end data training functions respectively.

In 2018, Nvidia released the world's first processor focused on autonomous driving, Nvidia DRIVE Xavier, which claims to be able to process billions of data in seconds while consuming only 30 watts of energy. At the same time, the processor was integrated with ZF's ProAI car computer and Baidu's Apollo (China's first unmanned commercial micro-cycle electric vehicle) to build China's unmanned driving platform.

Although the growth of the automotive business has declined, Nvidia's Chief Financial Officer Colette Kress said at the earnings conference that thanks to the cooperation agreement with Daimler to deploy AI-based in-car entertainment systems for its Mercedes-Benz cars, the company's artificial intelligence business is generally on the rise.

In addition, he emphasized that the company partnered with Boston-based startup Optimus Ride in August this year to deploy its first driverless project in New York.

So far, the automotive business accounts for about 5% of Nvidia's total turnover, and it still sits firmly in the top position in this field. There are more than 340 autonomous driving-related companies using Nvidia chips and system solutions. However, with the slowdown in the growth of the traditional automobile market and the continuous delay in the implementation of autonomous driving, it is difficult for Nvidia to change its growth slump in this field in the short term.