M&A Puts Autonomous Vehicles in the Driving Seat – 2017 Review

You might wonder when you’ll see our roads populated by autonomous vehicles (AVs), but there is no question that they will eventually. With the world’s population growing rapidly and concentrated in ever-larger conurbations, existing transit infrastructure is coming under strain and needs to be re-engineered.

Since total global travel distance per passenger per year will double by 2050, reaching 70 trillion kilometres, unsurprisingly new ‘smart’ cities are being built around the core concept of mobility. These cities will use data streams to operate the environment with which AVs will interact – a compelling rationale for corporate buyers not traditionally focused on transportation to get their hands on innovative pieces of technology and compete in the AV market.

Earlier this year, we saw the biggest acquisition of an Israeli tech company on record when chipmaker Intel paid $15.3bn or 41x sales to acquire Mobileye, an early leader in AV technology. With transportation becoming part of the broader smart ecosystem centred around data, Intel envisages a future in which ‘data is the new oil’ and cars act more like servers. For Intel, Mobileye provides not only key pieces of technology to capitalise on this vision, including computer vision systems that facilitate autonomous driving, but also key relationships with OEMs that could be instrumental to the commercial development of AVs.

As well as the likes of Intel, companies traditionally focused on transportation haven’t been resting on their laurels either, instead recognising the need capitalise on an evolving industry dynamic. In October, Tier One automotive supplier Delphi acquired nuTonomy, an AV company with a hundred employees that works with the likes of Lyft, Grab and the City of Boston, for $450m.

The transaction makes sense in the context of Delphi’s ongoing strategy to split into two entities: one will focus on powertrain activities, while the other will handle AV/EV activities. This development illustrates that acquisitions are essential if traditional players like Delphi are to consolidate their position in the space quickly.

AV technology is not being applied solely to cars: it is being extended to other forms of transport including buses, trucks and trains. As a result, various companies are lining up to get a piece of the action, like Chinese internet giant Baidu setting up a $1.5 bn autonomous driving fund and Uber rival Didi Chuxing raising $5.5 bn to pursue AV technology. Given the developments of the past year, 2018 is set to be a strong year for M&A in the autonomous vehicle space.