Volkswagen's driverless car 'startup' aims to take on Silicon Valley

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Waymo, Tesla or Zoox are the names that usually pop up when looking at the latest developments in autonomous vehicles. But now Volkswagen has announced that it is opening a new unit to commercialize self-driving vans and robotaxis – showing that in an ever-changing mobility market, traditional car makers have not yet said their last word. 

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The firm is creating an independent company called Volkswagen Autonomy (VWAT GmbH) and it will be owned entirely by Volkswagen. VWAT, headquartered in Munich and Wolfsburg. Its purpose: to develop a self-driving system (SDS) module capable of powering “Level 4” vehicles – which means that they can drive themselves without human intervention in a pre-defined setting.

VWAT’s first vehicles will be light commercial vehicles produced by Volkswagen’s Commercial Vehicles branch, to provide mobility solutions such as robotaxis and robovans in cities. But in the long term, Volkswagen hopes that the SDS module will be integrated with all of its cars.  

“We plan to start commercializing autonomous driving at large scale around the middle of the next decade,” said Alexander Hitzinger, senior VP for autonomous driving at the Volkswagen Group, who will also be managing VWAT.

SEE: The new commute: How driverless cars, hyperloop, and drones will change our travel plans (TechRepublic cover story) | Download the PDF version

Hitzinger was hired earlier this year to oversee Volkswagen’s self-driving car and mobility-as-a-service (MaaS) programmes, after he worked on Apple’s electric car initiative, “Project Titan”.

Shortly after Hitzinger joined the ranks of the automaker, Volkswagen announced a $2.6 billion investment in Argo AI, a Pittsburgh-based startup specializing in software development for autonomous driving. 

VWAT will work closely with Argo AI to include the latter’s expertise in building its SDS module, and the company said that this will lead the Munich site to “become the European headquarters of Argo AI”.

Munich is also the location of the Volkswagen-owned Audi Autonomous Intelligent Driving (AID) unit, which will be absorbed within the new company. And any other resources from Volkswagen’s research allocated to autonomous driving will be transferred to VWAT before the end of the year.

Hitzinger told ZDNet that merging different resources in a single, independent company was a way for Volkswagen to speed up the development process of autonomous vehicles.

“On the one hand, we have the know-how, stability and scalability of a huge company like Volkswagen. On the other, we have the agility and reactivity of an independent company that we are running like a tech startup,” he said.

“We want to bridge between the two and eventually combine them – and that’s what will let us successfully accelerate product readiness.”

This “best of both worlds” strategy is what Volkswagen is banking on to make a difference. And for Frank Gillett, principal analyst at Forrester, it is “absolutely” the right way to do it.

“So much innovation goes into trying to get autonomous vehicles to work,” he told ZDNet. “You have to combine complex technology with important industry knowledge. So it makes sense as a strategy to try to bring all these pieces together.” 

This is crucial in the context of a market saturated by high-performing competitors. Google’s subsidiary Waymo, for one, launched a self-driving car service last year, with analysts predicting it could hit a $10 billion revenue run rate around 2025. Last May, GM’s driverless car company Cruise raised $1.15 billion from a group headed by Softbank and Honda. 

And Elon Musk, for his part, is already claiming that Tesla has won the race for fully autonomous vehicle technology, and that is is currently “vastly ahead of everyone”.

SEE: This is what consumers around the world think about autonomous vehicles

It seems that Volkswagen’s latest announcement, therefore, reflects an attempt to make the most of its assets as a traditional car manufacturer in the face of new players rising fast from regions like Silicon Valley – which is in fact precisely where it is planning to open a new site for VWAT next year.

Hitzinger said that VWAT will therefore have “all the advantages” of a tech company, with the full backing of a large organisation’s operations, administration and management system; “that puts us in a very strong position compared to competitors,” he said. 

But while it certainly shows that the car maker understands how tough the market has become, Gillett warned that the future will still require the company to ramp up its efforts. 

“The announcement does set them up better to compete,” he said. “But it’s not obviously going to give them an advantage. Rather, it simply reflects the reality that you have to have this scale and focus to compete in what has become an extremely challenging landscape.”

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