Google's autonomous car spin-off: A tech firm, not an automaker

The new subsidiary of Alphabet will focus its efforts on developing self-driving technology, not the manufacturing of cars themselves. But it will need partners in the auto world to do that. 

Eric Risberg/AP
The Waymo driverless car is displayed during a Google event, Tuesday, in San Francisco. The self-driving car project that Google started seven years ago has grown into a company called Waymo.

Google’s autonomous car project is driving off on its own.

The project is now a stand-alone company under Google’s parent Alphabet, a signal the new subsidiary will attempt to commercialize its semi-secret research.

But Waymo – short for “a new way forward in mobility” – will focus on the software and sensors that will drive these vehicles, not manufacturing the vehicles themselves, chief executive John Krafcik said in a news conference Tuesday.

“We are a self-driving technology company,” said Mr. Krafcik, as TechCrunch reported. “We’ve been really clear that we’re not a car company, although there’s sometimes some confusion on that point. We’re not in the business of making better cars. We’re in the business of making better drivers.”

Google has dreamed of revolutionizing transportation through fully-autonomous vehicles ever since it started the project in 2009. But it has cautiously moved ahead with introducing the technology, even as its tech and automaker competitors have come out with semi-autonomous features such as Tesla’s Autopilot or are conducting public trials of self-driving cars such as Uber in Pittsburg, Pa.

The creation of Waymo signifies the impending commercialization of its research and development, say analysts and researchers. It also is an indication Google and other tech giants and startups are looking for partners in automakers so they can do what they do best — develop computer technology — and not more than that.  

“Car companies already have automotive plants. They already have the hardware. They already have distribution systems. If you really want to proliferate the technology quickly, doing that through infrastructure that already exists makes a lot of sense,” Michelle Krebs, a senior analyst for Autotrader, tells The Christian Science Monitor in a phone interview. “Apple and Google are not experts in building cars. It’s highly capital intensive and highly regulated. Why take it on? Just do what you do best.”

Waymo’s stated goal is to commercialize its self-driving technology, according to a handout. This technology includes sensors and machine learning – the ability of computers to learn from vast amounts of data over time.

Krafcik elaborated Tuesday on Waymo’s role in the future of transportation.  

"We can imagine our self-driving technology being used in lots of different areas – ride-sharing business, in transportation, trucking, logistics, even personal use vehicles and licensing with automakers," he said. "It's an indication of the maturity of our technology.”

Waymo was previously part of the semi-secretive research unit. Other projects under Google X include balloons that can deliver Wi-Fi to rural areas from 11 miles in the sky, and drones that could transform the package delivery industry.

Krafcik said the new arrangement allows Waymo to take advantage of the infrastructure and resources of Alphabet, the world’s largest publicly traded company in dollar terms, with the feel of an independent venture-backed firm, according to The New York Times.

It already has a partnership in place with Fiat Chrysler. The Italian-controlled auto group partnered with Google in May, agreeing to contribute 100 Chrysler Pacifica hybrid minivans to Google’s fleet of cars it has tested in four states, California, Arizona, Texas, and Washington.

The same day as the launch of Waymo, Bloomberg reported Alphabet also plans to start a ride-sharing service with Fiat Chrysler’s minivans. Google plans to deploy a semi-autonomous version of the minivan for a new ride-sharing service as early as the end of 2017, sources told Bloomberg.

Google has also been in talks with other carmakers such as Ford, but they haven’t yet produced high-volume deals, Bloomberg reported in October.

Alphabet is likely not alone in seeking partnerships with automakers. A November letter Apple sent to the National Highway Traffic Safety Administration (NHTSA) acknowledged it is “investing heavily in machine learning and autonomous systems” and has led to industry-wide speculation Apple too has shifted gears, as The Christian Science Monitor reported. 

[It] suggests that Apple has scrapped the idea of building the car itself, at least for the time being, and is instead focusing on designing the software and perhaps partnering with an automaker in the future, as General Motors and Cruise Automation did earlier this year.

Focusing on software is more in line with the company’s historic expertise and fits its efforts to improve machine-learning capabilities that allow computers to adjust their behavior without being explicitly programmed.

General Motors bought Cruise Automation, the self-driving startup, in March. GM also invested $500 million in ride-sharing service Lyft in April.

Other automakers are trying to develop the technology on their own. These names include BMW, Toyota, and Tesla. Tesla, for instance, already has a semi-autonomous feature in its commercial cars. It is preparing for its newest cars to go fully autonomous as early as next year, according to The New York Times.

Unlike tech companies, automakers already have the manufacturing capacity to make the vehicles and the dealerships to sell them. As Ms. Krebs of Autotrader indicated, those are large capital investments that most tech companies aren't looking to duplicate if they don't have to.

That, in part, is because the two industries have much different profit margins, says Raj Rajkumar, a designer of self-driving vehicles at Carnegie Mellon University. Silicon Valley has high-profit margins. Alphabet, for instance, boasted a yearly profit margin of 38 percent in 2015, according to The Wall Street Journal. The auto industry’s profit margin was under 4 percent, according to an analysis in January by the New York University’s Stern School of Business.

This report contains material from Reuters and the Associated Press 

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