At the beginning of 2022, investors watched the electric vehicle (EV) race pick up some impressive momentum. New companies emerged to challenge market leader Tesla (NASDAQ:TSLA) and legacy automakers expanded their EV production. However, as demand for EVs has boomed and sent TSLA stock up, production has given rise to another exciting stage of innovation: the driverless race.
Tesla has helped usher in automatous driving (full self-driving (FSD) tech, other automakers have been making their own strides. A subsidiary of Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), Waymo recently announced plans to bring robotaxis to Los Angeles. On the other side of the globe, Chinese tech giant Baidu (NASDAQ:BIDU) is introducing its own driverless fleet to Wuhan and Chongqing.) technology, the next critical stage of transportation. But while the EV leader has rolled out stages of its
CEO Elon Musk has said that Tesla will mass produce robotaxis by 2024. As of right now, though, multiple companies are beating it to the punch. As InvestorPlace contributor Will Ashworth reports, Waymo is significantly ahead of Tesla.
What has given names like Waymo and Baidu an edge? Multiple experts agree that it comes down to light detection and ranging (lidar) technology. One of the companies pioneering this tech is Luminar (NASDAQ:LAZR).
In an interview, Luminar CFO Thomas Fennimore told InvestorPlace that lidar has the power to push companies to the front of the driverless race. Taylor Ogan, founder of Snow Bull Capital, shares this perspective — and sees problems ahead for TSLA stock. As Ogan told InvestorPlace, “With Tesla’s current technology, it can’t win.”
TSLA Stock: Losing in a Lidar-Powered Race
How does lidar work? An advanced type of remote-sensing technology, lidar detects surrounding objects by emitting pulsed laser beams and measuring how long it takes for these beams to bounce back. This helps autonomous vehicles sense objects in their paths. Luminar’s website highlights the importance of implementing safety and ubiquity into the technology behind autonomous vehicles.
Luminar has partnered with leading automakers, including Toyota (NYSE:TM) and Polestar (NASDAQ:PSNY). But one of the most powerful and influential names in the EV space still refuses to use lidar tech. Elon Musk has described lidar as a “fool’s errand.” However, the system behind Tesla’s autonomous driving has itself led to problems that have repeatedly pushed down TSLA stock.
At Tesla’s first AI Day in 2019, Musk spoke out against lidar:
“Anyone relying on lidar is doomed. Doomed! [They are] expensive sensors that are unnecessary. It’s like having a whole bunch of expensive appendices. Like, one appendix is bad, well now you have a whole bunch of them, it’s ridiculous, you’ll see.”
Since 2019, Tesla has moved forward with its own FSD rollouts. Its vision-based system centers around cameras instead. This stems from a core belief that it’s better to attempt to replicate how humans see the road in order to inform the vehicle’s motions. However, this approach has led to issues.
Contrary to claims, regulators have reported accidents involving Tesla’s FSD technology. Snow Bull Capital’s Taylor Ogan first compiled the list of these FSD crashes, which the Los Angeles Times analyzed and verified. Many of these on-road incidents happened when self-driving Teslas unsuccessfully attempted to change lanes. One driver also cited “phantom braking” as the reason for their crash. In dummy road tests against other advanced driver assistance systems (ADASs), Tesla’s FSD has failed to prevent crashes when operating without a driver as well.
The Economic Case for Lidar
Neither Fennimore or Ogan are surprised by this result. Specifically, Luminar CFO Thomas Fennimore recently told InvestorPlace that Musk’s criticisms of lidar are outdated. He says Luminar has brought down the cost of its lidar package since 2019. The company has also made its design more aesthetically pleasing.
“The economics can make sense, especially on the higher-end vehicle, given the price point. And then you have all the benefits of providing a 3D sensor to the vehicle and its ADAS, as well as autonomous systems.”
The declining cost of lidar is important to note here. Back in August, Tesla increased the price of its FSD software package to $15,000, negatively impacting TSLA stock in the process. However, Luminar’s package is now lower than $1,000 for companies that buy in scale.
In 2021, Luminar saw a large purchase from Volvo (OTCMKTS:VLVLY) and, more recently, Volvo announced that it will be including the company’s Iris lidar package in 2022 models. Mercedes-Benz (OTCMKTS:MBGAF) is doing the same. Iris lidar includes “camera-like resolution” and “high data fidelity” as well as over-the-air updates.
Finally, while speaking with InvestorPlace, Fennimore addressed Musk’s focus on eliminating human error through technology replicating how humans see the road. According to The National Highway Transportation Safety Administration (NHTSA), about 95% of accidents on the road are the result of human error. As Fennimore sees it, on road safety can be improved by simply allowing technology to outperform humans.
“We ultimately want to design a system that is much better than the human driver […] Giving the system access to sensors that are unavailable to humans is one way to do that.”
Companies Going Beyond Tesla
Tesla may not be accomplishing that feat, but as Taylor Ogan sees it, other companies are well on their way. Specifically, Ogan points to the robotaxi advancements of Waymo and Baidu as well as AutoX and Pony.ai.
“These are companies that really are delivering robotaxis to the public where there’s no driver behind no deal. They continue to roll these out to new cities and they continue to be quite popular.”
Ogan is very bullish on what companies such as Waymo and Baudi will ultimately be able to achieve with ADAS. By contrast, Tesla has proven unable to operate vehicles without drivers. Plus, its autopilot division has been shrinking following the departure of Senior Director of AI Andrej Karpathy. As Taylor Ogan sees it, this shrinking illustrates why Tesla is losing the driverless race.
“They’re left with a very weak team of fewer than a hundred. These other companies have thousands of engineers on [their] teams, so from every which way you look at it, Tesla’s not going to do it where they’re at right now.”
Over the longer term, Ogan says Tesla should still not be counted out. However, legacy automakers are also embracing lidar now. Bloomberg reports that, as lidar prices have fallen, companies like General Motors (NYSE:GM) and Volkswagen (OTCMKTS:VWAGY) have increased their orders. Meanwhile, in China, automakers are adding lidar to vehicles boasting lower sticker prices than U.S. competitors. Almost all of Tesla’s primary competitors have seen the benefits that lidar can provide.
The Road Ahead for TSLA Stock
Clearly, the companies that have embraced lidar have an advantage over Tesla in the driverless race as of now. But that will become especially true if Chinese companies can apply lidar to lower-cost vehicles. Cornering the autonomous vehicle market is Tesla’s next challenge and, as Ogan notes, it cannot do this with its current FSD tech. Multiple road tests have proven that lidar sensor technology is better at stopping driverless vehicles. Competitiors both in the U.S. and abroad are also making advancements that can keep them ahead of Tesla moving forward.
That said, although Ogan speculates that Tesla will ultimately use lidar “if it wants to have a fighting chance,” he allows for the possibility that Tesla will go a different route and abandon robotaxis altogether.
Tesla’s future regarding AD remains uncertain. However, it’s clear that lidar will continue to grow as a fundamental component of the global automotive industry. Choosing to opt against lidar may harm TSLA stock further in both the long and short term. For the companies that produce lidar, though, the future looks bright.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.