1. How to use GuruFocus - Tutorials
  2. What Is in the GuruFocus Premium Membership?
  3. A DIY Guide on How to Invest Using Guru Strategies
John Engle
John Engle
Articles (284) 

Toyota Aims to Win the Autonomous Vehicle Race

A late start has not marred the Japanese automaker's confidence

While several companies have been working on autonomous vehicles for years, others have only just gotten into the game. One such company is Toyota Motor Corp. (NYSE:TM).

Despite its comparatively late start, however, the Japanese auto giant appears committed to catching up to its peers in the race. Indeed, Toyota is aiming to win.

Behind the curve

Toyota has a long-standing reputation for operational excellence. The Toyota Production System (TPS), the manufacturing system it pioneered, remains the envy of the world. Nearly every major automaker has adopted all or most of its principles in an effort to emulate the company's incredible speed and efficiency.

But Toyota has been seen to be lagging in the software and technology space in recent years. As the race to build self-driving cars has heated up, so, too, has attention on the company's late arrival. Other major automakers, including the likes of General Motors (NYSE:GM) and Ford (NYSE:F), have been investing heavily in their autonomous vehicle programs.

At the same time, the big tech giants have also thrown their hats in the ring, either through their own programs or through investments in autonomous driving startups. Alphabet’s (NASDAQ:GOOG) Waymo subsidiary, for example, is at the top of most lists in terms of technological development. Meanwhile, Amazon (NASDAQ:AMZN) recently invested in Aurora, a startup that already boasts partnerships with Volkswagen (XTER:VOW) and Hyundai (XKRX:005385).

One would think all this progress might worry Toyota. Yet, while it is a bit late to the party, that has clearly failed to dampen either the enthusiasm or the confidence of the Japanese auto giant.

Betting big on TRI-AD research and development

Toyota has always been a big spender on research and development, but its focus has generally been limited to the more mundane aspects of engineering. Software, especially the sort of complex software that is critical to self-driving cars, has never been its strong suit. The company has recently made some big moves to correct these deficiencies.

The most visible change within Toyota itself is the Toyota Research Institute Advanced Development Inc. (TRI-AD). TRI-AD is a joint venture with suppliers Aisin Seiki and Denso dedicated to creating the car of the future, including a commitment to building the world’s first truly autonomous vehicle. Toyota and its partners are betting big, having committed $2.8 billion to make TRI-AD the tip of their technological spear.

Currently composed of 500 employees, TRI-AD will soon have 1,000 engineers and other support staff under its roof. At the helm is James Kuffner, an old Toyota hand who previously led its principal internal think tank. Heading the software development side of the business is Nikos Michalakis, a veteran of Netflix (NASDAQ:NFLX).

People like Michalakis may seem out of place in a buttoned-down, eminently Japanese corporate culture, but part of TRI-AD’s job is to inject some of Silicon Valley’s disruptive DNA into the Toyota organization. One such initiative already in the works is a “Software Dojo” that will serve as the company’s in-house computer science academy.

Moonshot 2020

TRI-AD’s chief goal is simple: Design the car of the future. Its first self-imposed milestone is 2020, when it plans to unveil a vehicle that can drive itself on highways. Currently dubbed Highway Teammate, TRI-AD’s self-driving prototypes are already being built and tested:

"The prototypes and the preproduction vehicles that the team is building here at TRI-AD are going to be…the most intelligent supercomputer on wheels. We've called it the moonshot of my generation to build this technology and bring it to market."

But there is still a long way to go. As with virtually all self-driving programs, the suite of cameras and sensors necessary to develop and refine the technology is complex and expensive. It also requires expertise and know-how well outside its traditional wheelhouse. TRI-AD is aiming to bridge some of those knowledge gaps by bringing on fresh talent, but that is not always possible - or necessarily desirable. Hence, finding the right partners is crucial, as Kuffner has acknowledged:

“We know we can’t do it alone, so we’ve forged strong partnerships.”

Some of these partnerships are already taking shape. Earlier this month, TRI-AD announced a new collaboration with Nvidia (NASDAQ:NVDA), expanding an existing relationship between the chipmaker and Toyota to include development of autonomous vehicles and artificial intelligence programs. This technology is one of the cornerstones of self-driving technology, so the partnership makes considerable sense. Still, it is just a start to what will inevitably be a lengthy process.

Verdict

Toyota is now firmly in the autonomous driving race, but it has a long way to go before it can catch up with the current leaders. According to the latest rankings published by Navigant Research, Waymo continues to hold the lead in autonomy, but GM is not far behind. Ford sits in third place, but appears to have a solid shot of claiming the top spot eventually.

The company will have to do a lot of work if it hopes to catch up, but this is a long race. Indeed, it will probably be decades before self-driving cars are sufficiently safe, to be viable in all driving situations, let alone road legal.

While Toyota is currently trailing the established leaders in autonomy, it would be unwise to count them out. The Japanese automaker has proven itself to be a formidable player for decades and it is unlikely that will change anytime soon.

Disclosure: No positions.

Read more here:

About the author:

John Engle
John Engle is president of Almington Capital - Merchant Bankers. John specializes in value and special situation strategies. He holds a bachelor's degree in economics from Trinity College Dublin and an MBA from the University of Oxford.

Rating: 0.0/5 (0 votes)

Comments

Please leave your comment:


Performances of the stocks mentioned by John Engle


User Generated Screeners


pjmason14Momentum
pascal.van.garsseHigh FCF-M2
kosalmmuse6
kosalmmuseBest one1
DBrizanall 2019Feb26
kosalmmuseBest one
DBrizanall 2019Feb25
kosalmmuseNice
kosalmmusehan
MsDale*52-Week Low
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GF Chat

{{numOfNotice}}
FEEDBACK