Luminar Technologies, Inc. (NASDAQ:LAZR) RBC Capital Markets AV Panel March 24, 2022 11:00 AM ET
Company Participants
Nakul Duggal – Senior Vice President and General Manager, Automotive-Qualcomm Incorporated
Richard Tame – Chief Financial Officer-Aurora
Tom Fennimore – Chief Financial Officer-Luminar Technologies
Conference Call Participants
Tom Narayan – RBC Capital Markets
Tom Narayan
So I’m Tom Narayan, RBC’s European autos analyst. And today we have an exciting panel of executives to talk, one of my favorite topic self-driving vehicles. So thank you first of all of you three for being a part of this. It is the 12th and are navigating the energy transition series. I know that a lot of folks are focused on other things at the moment pandemic, war. But the genesis of this came at CES earlier this year, which I – it really changed the way I view the coverage of the auto industry and of a lot of things and specifically the Luminar exhibit for lack of a better word blew my mind in terms of how far the technology has gotten the Aurora booth in terms of how far they’ve gone with trucks. And then Nakul’s comments on stage is, really what has inspired the desire to do this event, no matter what’s going on.
Just a couple of numbers here, just to throw out to give folks a sense of why this is so important, I’m sure our panelists know these numbers, but over a million deaths every year globally, over a hundred million serious traffic accidents, over 90% of which caused by human error, the average speed of a commuter in Europe including traffic and idling, six miles an hour. So it’s not those long windy roads in the Alpha so you see in the commercials a third of city driving is looking for parking, 50% to 60% of some downtown city centers is just space for cars and parking, some may say that robo taxis could reduce the number of cars on the road by a factor of 20 and of course, a lot of that is theoretical, but self-driving could save lives, prevent accidents, smooth traffic flow, free up space in cities.
There is obviously technological regulatory hurdles. That’s I think why we have our three executives here today. So we have Nakul Duggal, heads up Qualcomm’s automotive strategy, Richard Tame, CFO at Aurora, and Tom Fennimore, CFO at Luminar. So thank you again for being a part of this, and hopefully we can end early and give you guys back some time. I know it’s very early in the morning on the west coast. So I’m just going to start maybe with some questions for each of you and by the way, if anybody wants to interject with anything, please feel free. And for the audience, you can enter questions in the system. I’ll try to get to them. Maybe we start with Nakul. First of all, yes, once again, thank you. At IAA and Munich, your CEO last year made some comments on digital chassis and maybe you could just refresh us. So what is the digital chassis? And as part of this navigating the energy transition event, why is electrification important in unlocking its potential?
Nakul Duggal
Good morning, Tom. Good to be with you. In a really exciting time that the automotive industry is going through and really anything that surrounds the automotive industry in terms of the massive dependency that various ecosystems have on transportation. One thing that electrification is doing is it is accelerating the pace at which auto makers have to rethink the physical chassis that they have to develop. As you start to remove a lot of the combustion engine type platforming that has been done over the years and introduce an electrified platform, it gives auto makers the opportunity to be able to rethink what the car architecture looks like. Now, I’ve said this many times in public forums, the life of an electric vehicle is going to be longer than the life of a combustion engine vehicle, lesser moving parts, batteries can be exchanged.
So you have to think about the platform as something that is going to have multiple lifetimes, it’s going to have multiple owners. And as you think about that, you have to think about the use cases, the value that you will generate from the platform from a very different vantage point than what has traditionally been done. The types of conversations that we have today with automakers include the idea of having a car architecture, where you are no longer putting semiconductors down on boards with embedded software. You are actually thinking about architectures, that there are blades that will host semiconductors that will be connectized that will have the ability to be replaced physically over the life of the vehicle. The software that is running on these platforms is highly abstracted, so that you can make applications that are running on the underlying processor as something that is actually abstracted from the processor.
These conversations are going on today. Some of these are actually en route. We are thinking about these newer architectures launching in as early as the 2024, 2025 timeframe. And certainly as the next wave of our roadmap starts to come out in the 2025, 2026 timeframe, you will see auto makers having moved to this architecture. So it really is the acceleration of the thought process where the platform that is being built has to be built with the idea of being monetized over its life, which is something that is very new, but also very refreshing in terms of how the automotive industry is embracing the concept.
Tom Narayan
And in terms of increasing the life of the vehicle, I guess, it begs the question of what does that mean, maybe for an automaker? I don’t know if you want to answer this or not. But yes, certainly if vehicles last longer, then it does beg the question of what does that mean for that for the industry? How does it change? Do automakers have to find other revenue streams? How do you view that as an opportunity?
Nakul Duggal
Sure, look, electrification is going to be taking place over a continuum. This is not going to happen overnight. It’s a complex process. It has huge dependencies on the grid, huge dependencies on charging infrastructure. So, over the next 10 to 15 years, you will start to see electrification, get more penetration, et cetera.
But I think the concept of, how do you develop a platform that you are actually monetizing based upon what the platform is being used for, that is talking more about the software and services business case that the automakers have in front of them. And there are bits and pieces of monetization that is being done today, mostly consumer focus, maybe some enterprise. But the whole idea of how do you actually develop a platform as an automaker where you are able to figure out if this is, for example, a platform that is used for a commercial application and it’s an electrified platform. What is the type of information that is necessary for the fleet owner to be able to get access to that allows them to be able to use that asset in the most optimal fashion?
Tremendous amount of data comes off of the vehicle that has to be married to a lot of data that exists in the cloud across various ecosystems. As you combine that you can find efficiencies in productivity, you can find efficiencies in insurance costs and reduction of accidents, as you mentioned before.
So, there is a very large amount of opportunity for the automotive industry as it starts to defragment the profit pools that exist. And I think a lot of that will happen as car operators transform.
Tom Narayan
Okay. So is it other words, all of the value that’s being created by this saving lives, et cetera, et cetera, can be extracted by the overall industry so that the pie itself can get bigger?
Nakul Duggal
Absolutely.
Tom Narayan
Perhaps for all parties. Okay. And then you’ve made comments about V2X in other words just curious to see what Qualcomm is doing specifically there. And do you see V2X as complimenting some of the other sensors, LiDAR, radar, cameras, or is it substituting it? And maybe you could also talk about geographies, like how it’s – I know it’s more prevalent, I believe in China. Just would love to hear your thoughts V2X?
Nakul Duggal
Yes. So, V2X is absolutely a complimentary sensor. I look at V2X as akin to a sensor that is listening because it is an out-of-band communications-oriented sensor. And the whole idea behind V2X when we kicked this off about five years ago was the cost of adding a communication sensor to a vehicle is quite small at this point in time. Every car has 5G or is planned to have 5G. So, the incremental cost of adding V2X capability is really not that high.
The complexity really is in the deployment. And you have to have infrastructure that has to be V2X capable. It has to be able to broadcast within a certain vicinity, the micro landscape that is going on, whether it’s construction, accidents, traffic speeds, and these are driver assistance alerts that are provided to the driver or to the vehicle that allow the vehicle to have a longer horizon. You can know what is going on a mile out, two miles out, or you know what is going on at the intersection itself, through a sensor that is different from the camera, the radar, the LiDAR in the vehicle. And so, it’s basically going to complement the sensors and make the driving experience safer.
In China, we are starting to see a lot of this already take off because as new infrastructure gets rolled out, the infrastructure is more modern. The ability to add infrastructure where a camera or a LiDAR sensor at a traffic light, or on a smart highway, connected to an infrastructure that is V2X capable is something if you deploy that on day one vehicles that are applying on that highway now have this additional assistance information. So, we are starting to see this. It is not from a technological perspective, it’s actually a fairly straightforward implementation.
The complexity really is in how do you get the scale to move up to where you are able to get the infrastructure to move forward. And then auto makers essentially embed the capability.
I think different markets are moving at different paces. For a variety of reasons in the U.S. we do have a spectrum challenge that we have to solve through in terms of how much spectrum is needed to get V2X off the ground. In Europe, we are starting to see more interest in embracing the 5G versions of V2X. In China, like I said, is actually in deployment already for a few years now.
Tom Narayan
And the other thing, I think, I’ve heard you talk about is the consumer relationship with the car changing. We’ve heard about the car being a living room or an office. And this goes to the other thing we’re talking about how the pie getting bigger for the overall automotive industry. Wondering what you think about that as playing a role in that pie getting bigger? And also, what does this say about private car ownership? So you could make a case that, it improves that potential. But then if everything’s shared, how would an automaker really differentiate itself or maybe this enhances that ability. I’d just love to hear your thoughts on that?
Nakul Duggal
They are in some sense separate questions. To me, the concept of private car ownership versus community based ownership have a lot to do with so many demographics. It has to do with age. It has to do with where you are in your lifetime. Once you have kids, you need to go have transportation of your own. If you’re living in a bigger city, you would much rather rely on public transportation, depending upon which part of the world you are in, societal norms are different. So to me, the concept of whether ownership is private or public is at some level kind of overblown. I think changes will happen over time, but it’s not like you’re going to see a big change in these trends from one year to the next, it’s going to – whatever change happens, technology will only be one aspect that will influence consumer habits.
To your first question around consumption patterns of your digital lifestyle in the vehicle. To me frankly, this is actually fairly straightforward. Today, we consume so much of content. We have so many subscriptions that we pay for in our home that we were not paying for five or 10 years ago. It’s because the way that technology has entered the home has been seamless, has been faster, has been offered by the same types of ecosystems that we are used to working with on our mobile phones or in our offices. I think the car is going in the same direction. It is a more complex platform because it requires many different ecosystems to come together to actually make that happen.
But if you have to serve customers in their environment with a specific set of services, with a specific set of technology, and the experience is designed to be very seamless, I don’t think my customers would actually not want to go ahead and pay for those things. And some of that has started to happen. I think you will see a lot more of that happening over the next three to five years, a lot of it is based upon consumption of content or consumption of connectivity in the vehicle by the consumer or where the car becomes more intelligently connected to the cloud. And then what types of services can the automaker not offer in the background that was not possible. And then of course, you have autonomous driving and driver assistance and those are brand new features that are accessible to customers that are really add-ons to say a previous automotive experience where those things were not as readily available.
Tom Narayan
Yes. I test drove the Renault Megane E-Tech a couple of months ago in Spain, and I know you guys are a big part of that it was a collaboration with Google. It has Google Maps, finally, a car with Google Maps, integrated I know they had to pay a pretty penny for that. And LG with the battery and really the debate raging in auto land is, should a company try to collaborate more and give up maybe some of the software component or the tech to Silicon Valley or should they do more things in-house. There’s some automakers that want to do stuff more in-house. And I mean, obviously the Megane E was a big success in terms of what people were saying because of a lot of the collaboration. Curious if your thoughts on this, do you think an OEM has the ability to do everything itself for – do you think they’re better capable collaborating with partners outside their own like narrow ecosystem?
Nakul Duggal
Yes, I think I would decompose that a little bit. I think one of the big reasons why that program was a success is because Renault has an excellent team, on staff, an excellent software team that has a tremendous amount of experience with Android, with consumer software. And then obviously has built a lot of experience with car software and they were able to bridge the gap between what Google would bring from a traditional consumer ecosystem, but more phone heavy and what we would bring as our experience in semiconductors that spans across multiple verticals and that collaboration, that partnership works very well because the automaker knows exactly what it is that they need to go do for their platform and expects the best from every ecosystem. If you fast forward this approach, and every automaker has on staff or competent capable software organization that is very focused on maximizing the customer experience.
To me, it’s really looking at every possible ecosystem that is available and extracting what is of most value, whether it’s the app store or is the maps or the voice assistant, or the content that you want that may be local, that may be global or making payments easier. You have to start to envision the platform as something that the automaker owns and wants to be able to continue to offer new capabilities, new services around and then work with an ecosystem that is willing to be flexible, willing to support that development. I think we found – each of us found our sweet spot in the Renault partnership, and I think you had a very good outcome and a lot of automakers are understanding that and moving that – and moving in that direction.
Tom Narayan
Thank you. Maybe I’ll buy one. I’d love to move to maybe with to Richard, love if you could share with us Aurora’s kind of mission, and maybe you could talk about the key product offering that you guys have. I know with from CES at least it was definitely a kind of a trucks first strategy, but then again you do have a relationship with Uber. I think there was a recent announcement was it last night on the ride share test run with Toyota. Just love to hear kind of your the mission and what the overall strategy is there.
Richard Tame
Yeah. No, sure. Thank you very much for having us. I’d love to talk about Aurora. And I think going back to what you said at the start, like you sort of those kind of list of stats and things like that, yes, like they’re all ones that you’ve heard and it’s sort of no off by heart, but every time you hear them, there’s still kind of they’re fascinating in this kind of it’s crazy. And one of the cool things about this space and this industry and working on self-driving is it’s one of those like really big unsolved problems.
And that makes it a lot of fun, very complicated, but it’s going to have a massive impact in the world. So Aurora’s mission is to deliver the benefits of self-driving technology safely, quickly and broadly. And we’re developing the Aurora Driver and the Aurora Driver is the hardware, the software and the data services that’s going to allow vehicles, whether it be Class 8 trucks, whether it be passenger vehicles or light commercial vehicles to move around the world by themselves.
Everyone knows the transportation market in the U.S. is massive. So there’s a great economic opportunity for Aurora, but you alluded it to it in your opening remarks, the self-driving technology is also going to be transformational, and we expect it to provide a lot of benefits to society as well. So increase in access to transportation, and certainly improving safety on the roads.
Our plan is to commercialize the Aurora Driver in what we’re going to call a drivers or service model. So we’re going to expect our customers will subscribe to the Aurora Driver and they’ll pay us a per mile fee. Aurora doesn’t expect to own the vehicles. We want to be an asset like company, and the vehicles will be owned by people with lower cost of capital people who are very used to and have experience management fleets.
We would expect at scale, they expect us to be a super attractive business with very high SaaS like margins. And the either Aurora Driver were certainly built from the ground up to work across all vehicle types. Some people in the space, they focused on either trucking or they’re focused on passenger vehicles. And some of that is and you’ll hear as you talk to people, how they say, well, oh, if you are working on trucks, you can’t work on cars at the same time, because it’s very different and vice-versa.
Aurora was started from a clean sheet of paper with the thought and the goal that this Aurora Driver would be extensible across platforms. And that’s what we’re doing. We’re certainly working towards trucking is off the launch of our first product called that the Aurora Horizon product. And then we’d expect to follow that up with the launch of in Aurora connect product for ride hailing.
We’re certainly excited by the potential of the ride hailing market. And yes, we noted yesterday, we were pleased to be able to announce one of our milestones, which was to demonstrate the transferability of the Aurora Driver from trucking to passenger vehicles. So we talked in the past around we have the same hardware and the same software, those powers or classic trucks and powers passenger vehicles and being able to put the Toyota executives in the cars in Dallas earlier this week driving them autonomously in the Toyota Sienna was definitely a kind of a cool milestone to be able to say, we’ve been talking about it and now you can see it and it’s happened.
So we have a really strong relationship with Uber. You mentioned that as well. Aurora acquired Uber self-driving business, Uber ATG in January 2021 for a number of reasons, one of which was we got a lot of talent added to the company like overnight. And this is a sort of very complicated problem to solve. You need a lot of talent density and being able to sort of add 900 odd people who’d been working on the problem was super helpful for us.
As part of that transaction, Uber made cash investment in Aurora and they’re currently our largest minority shareholders. We have a very good relationship with them. We have a commercial agreement that will allow us to deploy Aurora Driver powered cars on the Uber network. And then we also have a unique data sharing agreement with Uber, which gives us access to their price data.
We definitely think this relationship with Uber’s going to allow us the end of the Broadway taxi market and it’ll allow us to do it in a unique way. So our first kind of product that we’re working to launch is in the trucking space. And what that’s going to look like is you’ll start off from a terminal, which is close to a freeway. The truck will autonomously drive out. It will go down the freeway and then it’ll drop off the load at a terminal at the other end.
This is a really good way to kind of launch a product into the market and the self-driving space. You don’t have to go too deep into the cities to start off with, and that means you can start generating a revenue stream and you can start doing the things that autonomous driving is really, really good at like these long distances down freeways.
So what we think we can do is because of that capability, which is unlocked by our proprietary FirstLight FMCW Lidar, which allows us to see far enough down the road at highway speeds to be safe. We expect as we launch with our ride hailing product, you’re going to see something that looks very similar to what we’re doing on trucking. So you can think of something like an airport there’s a short distance to a freeway, there’s them high speed driving that we’re very good at that we’re doing with trucks. And then it’ll go off to like a hotel district or maybe a convention center. And what that allows us to do is to start a ride hailing product quickly do meaningful rides.
Some of the other competitors, they’re focused on sort of more dense urban areas and maybe not as good at doing highway speeds, whereas we’re able to do that. And our partnership with Uber means we don’t have to be able to go to a city and do everything. We can take a small fraction of rides, generate meaningful revenue, do interest in rides and provide services to the Uber network. So we think this is pretty unique and very excited.
From a consumer perspective, you can imagine, you’re at an airport and you sort of open the Uber app, you say, I want to go to the hotel. If Aurora can serve that route and Aurora Driver powered self-driving vehicle could show up, if you want to go to your family’s house, that isn’t sort of in an area that is served by Aurora, if human driver shows up, and there’s no difference to you, there’s no breaking experience, some of the competitors who want to sort of do the vertically integrated thing. There’ll be situations where they won’t serve where you want to go and that can be a frustrating experience. But we think this relationship with Uber really allows us to launch and ride hail in a very interesting way, which is unique. But as we said, the first product’s definitely working on is truck in and with the shortage of truck drivers, which is only going to get worse. We really think that’s a super exciting opportunity.
Tom Narayan
Thanks. Yes. Sorry, I laid you with a very loaded question. Maybe I got another one for Tom, then maybe you can share with us Luminar’s mission and product offering. I know that your CEO’s talked about the focus is more, I think on safety perhaps than – perhaps robotaxi development. And I was just curious, is that more of a focus on kind of the near-term or an apprehension on robotaxi. But I’d just love to hear a kind of the mission for Luminar. And also you could maybe tell us a little bit about the CES exhibit, which, like I said, was just mind blowing. I thought that the capabilities, how far we’ve gotten – I’d just love to hear about – more about what you guys plan on doing?
Tom Fennimore
Sure. And first, Tom, thanks for having me on here and being able to share more about Luminar. One of the one of the things that Austin, our CEO did share at CES in addition to the proactive safety demo, which I’ll talk about here in a second is his longer term 100-year vision for the company. And the two mingles that he has to help save over the next a 100-year, a 100 million lives, as well as a 100 trillion hours of save productivity. And in the near-term, you are right, we are focused on – what I would say on two areas, it’s this proactive safety, but it’s also highway autonomy. And in the longer term, we’re big believers in robotaxis, but we have an institutional point of view that that is a much more difficult problem to solve and it’s going to take longer.
And so we think we’re going to be closer to the end of this decade, where you start to see robotaxis full Level 5 vehicles on the road and scale. In the meantime, over the next several years, we see a significant opportunity more on the passenger vehicle side, where we can make a real impact in terms of not only making the vehicle safer, but also deploying what we call highway autonomy, some people call it Level 4, Level 3, but in terms of being on the highway, and if you actually think on the highway and having a full hands off eyes off the road, that is a much simpler operational domain to solve for, because – and I’m over simplifying this to a large degree, but when you’re on the highway, the two goals are stay between the two white lines, stay in your lane and don’t hit anything in front of you.
You avoid what I would call the chaos of the city streets. Hopefully, there’s no kids running on the middle of I-95 or I-80 or animals or anything. And that is technology that we’re working with Volvo to deploy initially starting next year and we’re working as we talked about at CES real time with California regulators. So but in order to deploy that highway autonomy, you need a long range LIDAR that works. You need to be able to see out 250 meters, because what that allows you to do is bring a passenger vehicle to a safe stop, if it detects an object in a way. So if you have the right long range sensor, you can enable highway autonomy with hands off eyes off the road. And as I said, it’s, it’s easier operational domain to solve for than some of the Level 5 taxis.
And so that’s what we’re focused on. In the near-term, it’s both taking existing ADAS systems and making them safer with proactive safety and then deploying highway autonomy with eyes off. Similar versions of the technologies are on passenger vehicles today. You see it with some of the existing ADAS systems, and then you kind of see it with – that Tesla’s doing with FSD or where GM is doing with Super Screws. Our LIDAR makes those systems better. And here’s the reason why.
Those technologies today depend on camera technology, there are other sensors but it’s primarily camera technology. And that’s a 2D sensor. And so you’re taking once again, I’m a finance guy, so I’m oversimplifying, but you’re effectively taking a bunch of pictures and then doing a bunch of calculations to try to guesstimate where the objects are in front of you, how far they’re away and whether or not they’re a threat to the vehicle. With a LIDAR that’s 3D imaging. And so, you know precisely where every object is in front of you up to 250 meters. And so that allows you to increase the robustness of today’s ADAS systems. And that’s what you saw with the proactive safety demonstration that we did at CES, where we took a car that we integrated not only with Luminar’s hardware, but also I would say the software package that our team built.
And we did a side by side comparison of effectively driving that at dummies, both dumies that are just standing there versus you go around curves and then they jump out. And what you can see is that because you have that real time 3D imaging, and you have a ground truth of where everything is in front of you, you can make the vehicle a lot safer and you can make the highway autonomy a lot better user experience where you don’t have to keep your hand on the wheel. That’s what we’re focusing on the near-term. Longer term, look, we’re working with several robotaxi companies today. And so we are spending time in that space, but over the next several years, we see a much bigger incredible opportunity on the passenger view.
Richard Tame
And if I can just sort of add something to that as well. I think in the industry, the software industries you get into it, there’s the debate around, oh, can you do this with cameras? I think, what Tom said, and certainly Aurora believes that you’re not going to get to kind of a safe scalable level voice system just with camera technologies and Aurora certainly multimodal, we have a camera, we have radar, we have LIDAR, and we can certainly agree that that’s the right answer to it to make it a safe and scalable product self-driving industry.
Tom Narayan
Yeah. I mean this past earning season, I mean, I cover a lot of the legacy OEMs and suppliers, and I was particularly, I think annoying with a lot of the management teams and ask them about this topic. And I think most of the legacy players do believe that we’re headed to eventually Level 4 at some point, but that the technology just isn’t there today. And this I think did contrast with a lot of what I heard at least from CES.
I guess, maybe Tom, CES definitely showed us the tech has come a long way. Maybe you could comment on where you think we are on the tech and what are the hurdles we have to get to Level 4. Is it more software? Is it hardware? It sounds like, we have a lot of the hardware, like you guys talked about with LIDAR. But just love to hear Tom, your thoughts on where we are in the state of the tech to get to this utopia Level 4 world?
Tom Fennimore
Yeah. And Tom, I think there’s been a lot of movement over the years about what the different levels means. Sometimes I hear people have confusion around what Level 3 and Level 4 is, and now I’m hearing stuff like Level 2++, and we kind of simplify it at Luminar and there’s really two things that matter. One is, are you assisting the driver or are you automating the system, right? Is the – is your technology helping the driver be better? Or is your system actually driving the car? And so let’s call it, the first thing is assist it or autonomy.
And then the second thing, it really comes down to the operating domain, as we talked about right, there’s a difference on the level of autonomy that is required for the highway, which is a simpler operating domain versus in the city streets or full Level 5 everywhere. And so as we kind of look at it highway autonomy Level 4 driver completely out of the loop that is technology that we’re working with Volvo to deploy next year. And the good thing about this offer, and I think Nakul talked about this at the beginning is, we kind of view our software as never really being done.
It is something that is going to continue to be modified and improved and enhanced over time, right? Think about Microsoft Office, that’s been around for 30 years and there are improvements and additional functionalities that are added over time. But you need the right hardware on the vehicle initially. And so if you go back to what Nicole was saying is, and changing kind of the way that the OEMs are building a car, it used to be a onetime transactional interaction with the consumer.
We think that’s going to change. And some OEMs are starting to move that way with probably Tesla at the forefront, but in order to have, in order to capture that enhanced software functionality overtime, you need to have the hardware on the vehicles initially, right? You can’t put a lidar, you can’t upgrade over the air by putting a lidar on the vehicle. It needs to be designed in initially in order to make that work. And so is the highway autonomy going be available everywhere in the world starting next year? No, probably not, because you’re going to face regulation hurdles in certain states or certain countries, but it’s going be in a large part of the world. And then eventually you introduce it more to more and more highways over time. And then as you get more comfortable with the software and the systems and working out the bugs, you can add that additional functionality over the time. And so we kind of look at it for the right operating domain. You can get to level four, our target is next year, but it’s not going be everywhere. It’s going be in certain operating domains initially and then growing those over time.
Nakul Duggal
Maybe one thing I could add to the comment that Tom made, I think there is an aspect of the technology. There is also an aspect of safety in terms of where the automaker actually has to step up into say, I believe that the product that I am now enabling the customer with is safe enough to where I’m going step up and take responsibility if something goes awry. And that is a very important distinction to keep in mind, because a lot of this actually has to also do with how does the automaker market at the product? Which parts of the world have the right infrastructure? What time of day would this work? How do you educate the driver to get into the habit of actually allowing the car to take over for long periods of time? If something has to fall back to where the driver is to engage back in, what is that reengagement procedure?
So there is the technology readiness, and like Tom said, the ODDs, the operational domains within the technology works have to be very clearly defined. But then there is also the aspect of how does a consumer now start to embrace this technology. And we are seeing with a lot of early self-driving solution that are out there, consumer education is critical, because this is again at the end of the day a safety application
Tom Narayan
And Richard, maybe I’ll throw it to you. What you have anything on that state of the tech and what you think the main hurdles are?
Richard Tame
Yes. I think, we feel like we’re in a good place with our technology as well. We continue to work hard across all parts of the stack hardware and software. But today we have trucks driving autonomously down the freeway in Texas. We have passenger vehicles driving autonomously in Texas, obviously with safety drivers. But it can – it sort of, it works. Some of the things that we would be focused on internally as examples on the software side would be things like construction zones and debris. Now, these are not, we don’t think that these as like major hurdles, but they’re just like another set of things that need to be worked on as you sort of move towards getting new product out into the world.
To Nicole’s point on safety, Aurora fundamentally believes that is critical in this situation and with this new technology, we released, and we were the first autonomous vehicle company. We believed to release a safety case framework, which you can see on our website. And this is our full sort of case that lays out how we plan to get comfortable, that there are a driver of safe to operate on public roads. And there’s a lot of kind of parts you can see it sort of nests down into different sort of kind of contentions and things that we have to work on and sort of prove to ourselves that people are obviously working on a day to day basis.
From an Aurora’s perspective, we also need our OEM partners to deliver the platforms that they’re working on with us. We believe it’s super essential to have deep relationships with OEMs, if you want to have a safe and scalable self-driving product. And we have those with pac car with Volvo with Toyota they’re sort of developing vehicles with the redundant systems that we need to be safe because in a self-driving world level four, you’re not going have a human in the vehicle to take over. And right now we’re the – we as humans are the redundancy in a lot of vehicles today. So again, from a timing perspective, you can see some companies are operating in very, very limited ODDS without drivers today. So I think Aurora continues to work towards an expected launch of our trucking product at the end of next year, late 2023.
So I think I agree with others that we’re talking years, not decades before Level 4 is out. And again, don’t disagree that it’ll be like a limited set of domains and that will expand over time. But one of the cool things about us doing trucking first is once you get trucking working in Texas, we think it becomes more of an operational scaling problem than a technological scaling problem because freeways are quite self similar across the U.S.
Tom Narayan
And what about the cost side, it sounds like the tech is largely there. What about the cost side of the tech? Is that something that, we look at kind of like – I look at electrification, I think of the battery pricing coming down. How do we think about the cost side of the tech? Is that something that is a problem right now? Or maybe that’s not an issue? How should we think about the cost side of the tech?
Richard Tame
Yeah. So from a rural perspective, the road driver hardware, there’s a computer, there’s sensors, there’s a LIDAR, this is still early in its life. That’s not being produced on a large scale. So on a unit cost basis it’s expensive today. Some people would say, well why not just launch Aurora Horizon, commercially with a safety driver in there. And then we responded like, that’s not really a product in our mind, if you have to pay for the driver and you have to pay for the self-driving hardware, that’s just a really expensive trucking product. So we think that the – we don’t think that there’s any Chris Urmson, CEO, he likes to say there’s no optanium in any of the technology. So we believe that we’re just going to see kind of a standard kind of cost curve of normal product life cycle reduction in costs of the road driver hardware over time.
And as we scale up, obviously you see the benefits of scaling that there. So we’re confident about that. We obviously work hard on keeping costs down, getting the hardware costs down as quickly as possible to up root economics over time. And an example of that would be last year, we acquired a small company, Iris Technology they’re silicon photonics company. And that kind of expertise will help us to make our proprietary first light LIDAR, smaller and more manufactureable, which of course helps on the cost side of the time as well.
Tom Narayan
And Tom, maybe I’ll throw that question at you, what are your thoughts on the cost side? Is it like a similar cost curve that you see in most industries? Is that really even a hurdle right now? Or what are your thoughts there?
Tom Fennimore
Yeah, so I’ll comment it purely from the LIDAR perspective, because that tends to be the most expensive sensor on the vehicle. And one that we’re kind of intimately familiar with, but one of the benefits of our strategy of focusing on the passenger vehicle market over the next several years is it brings the scale, which allows us to get our cost to a more effective way for our – we’ve said publically for our sensors, that we’re going to start selling in the series production next year. Our ASP initially for just the hardware is going to be a $1,000 plus or minus.
We custom designed our LIDAR, didn’t buy off the shelf parts. And so our bill of material, think about it as the material cost of our LIDAR, our target for our first full year series production is in that $500 range. And at a $1,000 ASP, that creates a viable business model for OEMs to start putting our LIDAR technology on their vehicles. Our goal over time is to bring that down even more and to take our BOM from a $500 target to $100 target.
Last year we announced a vertical acquisition – a vertical integration acquisition of Optogration which does art in GaAs chips. Earlier this week we announced an acquisition of a laser company called Freedom Photonics based here in California. That’s going to allow us to effectively bring the cost of our laser down significantly in the future, which will help us achieve our longer-term BOM targets. So we kind of view the cost of our technology of where it needs to be commercially viable today, effectively. And then what’s going to happen is as we get – the great news last year about Volvo making a standard on their next generation, XC90s, it starts giving us that scale.
And so when you start taking Volvo, Mercedes, Polestar, Shanghai Auto, we’re going to be making middle part of this decade, several hundred thousand units of our LiDAR a year. And we’re going to learn a lot from that. It’s not only going to allow us to take the cost down of our LiDAR, but it’s going to allow us to continually get the data necessary from people driving on real roads in real time, which is going to allow us to enhance our software as well. And so the cost is where it needs to be today. And then as we get into that series production scale, it’s going to allow us to take it down even lower to allow us to really attack the mass market series production vehicle.
Tom Narayan
I’m getting a lot of questions. The same question from the audience from multiple people, yes, regulatory. This was the big one from CES. It seemed like a takeaway from CES was that the tech is largely there, but regulatory is the big obstacle and policy, and it was different by geographies. Maybe I’ll probably ask all three of you, but maybe Nakul, if you want to start, I think you started mentioning policy regulatory. I mean, what are your thoughts on that as a hurdle, do you see that being overcome? Do you see that as a bigger obstacle here versus the tech or yes, what are your thoughts?
Nakul Duggal
Yes, I think if the question is around the move from driver assistance to automated driving, I think several automakers just even in the last few weeks have come out in publicly stated that they will be stepping up and taking responsibility when they announce a product, a passenger vehicle product that offers conditional autonomy. And really what it comes down to is when you as an auto maker, who’s been in the business of keeping your customers safe when you have to step up and make that comment around conditional autonomy, and you stand behind the product. That’s a very serious statement. So it obviously comes with a variety of different caveats around exactly when is that feature supported? When does the automaker feel like it is ready to be able to offer that feature under what condition and what environments.
And I think Tom was mentioning earlier, this is something that is going to keep evolving over time because essentially the quality of the product, the scope of the product expands over time and software is what is used to expand that, it requires a tremendous amount of continuous testing. You find problems, you fix them. But we are now starting to see automaker step up and make that claim. I don’t know as much about the trucking space, but I’m sure my colleagues here can speak to the same question in the trucking context.
Tom Narayan
Sure. Richard, what are your thoughts on regulatory?
Richard Tame
Yes, for sure. So I think, yes, it’s a sort of follow up from Nakul. We think it’s super important to have a deep partnership with OEMs for that very reason. It’s not possible to go and just buy a truck off a walk and kind of straps them, maybe technology on and expect that the manufacturer would be happy with that being out in the world. So we’re much more sort of working very closely with PACCAR and Volvo and making sure that we have an autonomous ready platform.
Turn into regulation, in the U.S., if we were ready to deploy a self-driving truck today without a human driver, we could do so in the majority of the states. So either deployment there is expressly permitted like in Texas or Arizona, or there’s just no laws expressly prohibiting autonomous vehicle operations. So that might be unintuitive to people who aren’t familiar with the space. But if Aurora said, hey, we believe our truck can go into the road today without a human driver, we could have a commercial product based on the fact that Aurora believe that it was not at an undue risk into the world.
Now, of course, if you did that and something happened, the government has many ways to make you wish that you hadn’t for one of a better term, like you have enough kind of sticks, but it’s not like you have to go in the U.S. and get sort of a permission slip or a sort of take a lot of boxes from a regulatory perspective today. That being said, Aurora was one of the first companies and Chris Urmson, our CEO built relationships with the government and the regulators in his prior lives as well.
We’re very proactive on the government relations front. And we work with the federal level. We work with the state level and the local level, because we want to educate the stakeholders and then the public as well about what we’re doing and what these vehicles will do in the world and we’ve been very successful with that. And we think it’s a very important part of our strategy as we want to launch the product. A little [ph] different more like the aviation world where you have to get sort of type certification. But from an Aurora perspective, we’re working hard towards launching the commercial trucking product at the end of 2023 follow with by the ride-hailing product. And what really we need is continued technological development, and then closing the safety cases for each of these domains, but not a regulator hurdle that we have to overcome.
Tom Narayan
Yes. It really seems to differ on geography. I remember speaking to one OEM that that I cover about this and in Europe, it’s a German OEM and they told me flat out that that the moment you hear, so and so OEM kills human, we’re done. So there’s definitely a different kind of view. I feel like it’s probably different in China, certainly in the U.S., but I mean, we talked about earlier on that the benefits are a tremendous, right? So it feels like the inertia is there.
Tom, what about – what about you on regulatory? What are your thoughts?
Tom Fennimore
Yes, to Tom, to your point, if you think about the three major geographies, China’s actually – there’s a huge regulatory push for this technology. China use this is an opportunity, they’re the largest automotive market. They want to be the leader in autonomy, and the government has actually come out and set targets for the all auto makers in terms of where they should be on autonomy by 2025 as well as 2030. And so – and I would say there’s also a different risk threshold there, and we kind of see it firsthand because we’re working in parallel with Shanghai, Auto and Volvo and Mercedes-Benz. And yes, Shanghai, Auto, I would say is much more aggressive in terms of trying to get this technology out there. So in China, I would call it a regulatory push. Europe it’s – once again country by country basis, I would say they’re the more conservative and U.S. is somewhere in between.
And it’s really a lot state by state and, there’s certain ones like New York, which are probably closer to Europe and then certain others states, which are maybe closer to China. When you look at the two products that we’re trying to put on the road next year, it’s the proactive safety in the highway autonomy. The proactive safety, we actually think that this is an easy discussion with the regulators because we believe that this is a technology that’s going to significantly improve the safety of existing ADAS systems. And so we actually are expecting a regulatory tailwind in there. Once we start to get this technology on the road and gather data and showing the safety improvements.
And then once again on the highway autonomy, I agree with what Nakul said earlier today. There are products like that that are on the road today, which there’s a lot of room for improvement. And so here, we – once again, we think we’re going to significantly improve the safety of this, but the threshold that we need to cross is less of a regulatory one to get this ready for series production. It’s making sure that the OEM is comfortable with it. And when you think about the first partner that we’re launching this with, with Volvo, they’re probably the OEM that is most synonymous with safety. They’re not going to put – put it – they don’t need to, yes, they need to across the regulatory threshold, but their internal threshold to get this ready to put this on the road is a lot higher and a lot more difficult to cross.
Tom Narayan
I guess we only have a few minutes left. So I promise to end early but maybe the last question will be – will be the wild card one. The fun one, I guess, Nakul, I mean, we’ll start with you. When do you see ubiquitous ride sharing or robo-taxi Level 4, whatever ubiquity means. When do you see that really happening and maybe as a corollary to that, maybe who – how do you see the auto-ecosystem looking like whenever that happens? Is it a number of players? Is it legacy operators? Is it mostly tech players? Yes, if you put a crystal ball, what does it look like in, and how far away are we from that?
Nakul Duggal
Yes. I can share with you my thoughts and obviously it’s a harshly debated topic. Look, I think we think about these things maybe from a slightly different vantage point. I think the first question with robo-taxis is the economics around the business case of robo-taxis. At what point in time is the robo-taxis as a business going to get to a scale where it actually makes sense to continue to keep investing in mapping out densely populated parts of the world and remove the human driver and replace it for the robot. So what is the business case behind that? How long does it take to go with that? And really, what is the demand that you are trying to service?
Then the second question is the tech that is needed, if you’re talking about condition autonomy in a passenger vehicle that is an automaker feeling that they can allow their customer to disengage for the car to take over when there is no driver in the vehicle that is a completely different level of autonomy.
And the risk involved that you’re taking on has to; it absolutely has to be contained because the downside is just massive. So you have to think about the ODD for a robo-taxi which then layers on top of the business case. What parts of the world, what types of use cases does it make sense for a robo-taxi to apply where you are actually addressing issues like not enough drivers or lower congestion, but do it in a safe way? What is the remnant of the business case? You could extend the concept of robo-taxi to an automated truck, but that then brings about very different type of business case in terms of, you really have to map out the routes, where you want the autonomy to take place in a very safe way, because there is no driver in the truck.
If there is a driver in the truck, obviously the business case changes. To me, this is one of those questions where the winners in my mind are going to be those companies that are able to play both the passenger vehicles to strategy, as well as the robo-taxi strategy together, because the tech really has to be very modular. You have to be able to evolve the tech at a very massive geographical scale, over a continuous period of time, learn one from the other, and then be able to bring new learning’s that you are getting access to on one side, then goes back into the other and you evolve it.
In terms of a time horizon, time it really comes down to, I mean, if, you know, if you were to ask me, Hey, is San Francisco ready for robo-taxis sooner than say, Mumbai sure. London yeah, maybe San Francisco’s farther along, along, but how many robo-taxi providers do you need to cover San Francisco and will they be profitable within a window of time? What kind of businesses are they running? What is the cost of the tech that goes in into these cars? Very complex question to answer because everybody’s starting point is completely different.
Tom Narayan
Okay. I thought, I’d take a shot at that. Tom, what are your thoughts?
Tom Fennimore
One thing, I think we have an institutional point of view here at Luminar in the way that we think about our end used markets progress in middle part of this decade. We’re hoping to have our technology on a few hundred thousand vehicles on the road and we’re well, on the way there between the announced deals we have with Volvo, Polestar, Shanghai, Auto am I missing a Mercedes-Benz and a few others that we have there. In terms of the robo-taxi, where you’re taking the driver completely out steering wheel out of the vehicle. We think in order to see similar scale you’re, probably around the end of this decade.
Tom Narayan
Okay. And then Tom, crystal ball. Richard, sorry.
Richard Tame
Yes, no worries. Yeah, I think, yes, we’re going to working towards – trucking product at the end of next year, right. I like to follow after that ubiquity seems like a really hard thing to predict, probably not worth doing it. I think what’s important is, as you build your business model, you sort of, you scale up and you don’t get ahead of yourself. I think we, our business model is we get paid by the number of miles traveled. I think the number of miles travel, isn’t going to go down probably go up over time. So we feel kind of pretty confident about that. And I think it’s important to find from a rural perspective, find what we’re good at and find a way to kind of have an interest in business, generate revenue and then scale up over the back of that. But yeah, we’re not going to make a call on ubiquity of robo-taxi. That seems one for the future.
Tom Narayan
Yeah. All right. Well, thanks. Thanks a lot, everybody. It’s a great discussion. One that, I’m sure this isn’t going to be a small part of many to come but yeah, thanks a lot for all your time and yeah, stay tuned for the next navigating the energy transition series event, more to come on that there will be a replay of this one. With that, everybody be safe and thank you very much.
Tom Fennimore
Thank you very much.
Richard Tame
Thank you.
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