As Vehicles Go High-tech, Israel’s in the Driver’s Seat

In addition to the high-profile Waze and Not Not just Waze and Mobileye, dozens of local startups 
are entering the fray and investors have taken notice.

Artist’s rendering of Mercedes-Benz’s projected autonomous car.
Artist’s rendering of Mercedes-Benz’s projected autonomous car.

If you would ask the average Israeli about their country’s involvement in the auto industry, they would probably sum it up with Mobileye, the auto collision avoidance and self-drive tech company, along with navigational app Waze, which was sold to Google. Those with a more historical perspective might also mention the Susita, from the country’s defunct auto industry.

The global automobile industry has been centered in the United States, Germany and Japan, but as with other sectors that are being transformed by technology, Israel is becoming a powerhouse when it comes to certain aspects of the car industry.

New technology is making the automotive industry smarter and more efficient, and is ultimately also headed toward the widespread production of self-driving cars. These developments have transformed an industry that used to be based primarily on sheet metal and iron into one increasingly reliant on software. In addition to the car manufacturers’ own efforts on this score, tech giants such as Google and Apple have ventured into the fray.

And then there is Israel’s prominence in the field, which even in the past several months is reflected in Volkswagen’s investment of a whopping $300 million in the Israeli firm Gett (formerly Gett Taxi), as part of its effort to create a shared fleet of smart vehicles. And in July, Mobileye signed a collaboration agreement with BMW and Intel for the production of a self-driving car.

In other developments, NNG, the developer of iGO navigation software, bought the Bnei Brak-based automotive cyber firm Arilou and the Israeli firm Saips, which is involved in the development of complex algorithms, was sold in August to Ford Motor for a figure estimated in the tens of millions of dollars. And the list goes on. Last month Volkswagen became a 40% partner in a new cyber security firm in which former Shin Bet security agency head Yuval Diskin is involved.

As far back as 2010, General Motors spotted the potential that Israeli talent offered in the field and established a research and development center in Herzliya. Daimler Mercedes-Benz, which local industry sources say is also showing great interest in Israel, is expected to follow suit in the coming months.

“There are now about 100 processors in a car and the more that [automotive] technology shifts in the direction of using software, Israel has an increasing advantage,” Yahal Zilka, a founder and partner at the Israeli firm Magma Venture Partners, which has already invested in four smart vehicle firms, tells TheMarker. “It will have an impact on all of us, and Israeli high-tech will have a substantial part in it.” There has been virtually an airlift of automotive executives who have visited Israel in recent months to meet with local companies in the field, he adds.

Confusing coverage

Media coverage of the future of the auto industry is a bit confusing, however, focusing primarily on self-driving car technology. Analysts at the Boston Consulting Group predict that the driverless car sector will be worth $42 billion by 2025, but in the meantime, car manufacturers and high-tech firms are talking about other transportation solutions such as the ride-sharing that Uber has made ubiquitous in some parts of the world.

There are two major functions that will determine what the automotive industry of the future looks like: control and ownership, says accountant Tal Chen, a partner at Deloitte Israel. The control function involves either a human driver or automated control, and when it comes to ownership there is the dichotomy of self-ownership or shared transportation, he says. Chen cited recent comments by an auto industry executive who noted the rapid acceleration in the pace of change that the industry is expected to undergo and said the automakers want to be substantial players in this “ecosystem.”

For his part, however, lawyer Itay Frishman, who heads the high-tech and venture capital group at the law firm of Gross, Kleinhendler Hodak, is more cautious. “It’s not necessarily the best startups that will be successful,” he says. “The automotive industry doesn’t want to step on its own toes. It needs technology, but it is also threatened by it, so success is dependent on whom the major corporations will be comfortable working with.”

Most of the deals, he says, are cooperative ventures, which is different from how most startups work. The process is slower and startups need to have patience, he adds. Another challenge for startups in the field is regulation, Frishman notes, explaining that it is a new field presenting unfamiliar issues such as liability regarding self-driving cars.

The main technology fields related to the car industry include the development of various kinds of chips; communications; big data and analytics; artificial intelligence; and above it all, there is the looming threat of cyber attacks. And there is also the challenge in the development of self-driving cars of integrating the range of technology so that the various features communicate with one another, making the journey safer and more comfortable.

For his part, Zilka says all of these fields are ones that Israel has particular expertise in thanks to Israeli academics and the defense industries. “Everyone has noted that we have special talents here, and I am not just talking about cyber security. Back in the 1990s, Israel was a communications powerhouse and Israel is a leader in the radar field as well.” The expertise that Israel has in a number of fields also applies to the automotive sector, he adds.

Valens’ accidental connection

One of the more interesting Israeli high-tech stories, which is related to the car industry almost by happenstance, involves the Hod Hasharon-based company Valens, which is now considered an influential force when it comes to cars of the future. Established in 2006 by six people, all of whom are still with the company, Valens develops chips based on technology called HDBaseT, which provides connectivity using Ethernet cables among various video products. It’s used mainly for conference rooms, conferences and public facilities such as shopping malls and airports.

Valens CEO Dror Yerushalmi explains that his company’s technology has allowed for the use of one cable instead of a multiplicity of lines. The company has managed to establish the industry standard. Last year it won the television Emmy award in the United States in the field of technology, along with other recipients including HBO, Netflix and DirectTV. Along the way, however, about two years ago, Valens was surprised to attract the attention of senior executives of a major auto manufacturer that Valens asked not be named. The automaker realized that the audio-visual technology that was Valens’ mainstay would be a nearly critical component for high-tech vehicles and self-driving cars.

Magma Venture Capital’s Zilka says the industry recognized the problem presented by the increase in data that needed to be handled in the vehicles, but explains that cables can be heavy, which is a major concern for the industry. Yerushalmi, of Valens, says the ability to carry a number of streams of data in one cable therefore becomes all that more important.

Although the quantity of cables is small in most cars now, the more that accessories such as cameras, sensors and data processors are added to the vehicle, the more light-weight cables will be required. TheMarker’s interview at Valens was cut short by a group of senior executives from a German technology firm that was interested in Valens’ knowhow.

Mobileye was the pioneer

The Israeli company considered the pioneer on a global scale in the automotive sector and which in many respects has promoted Israel’s prowess in the field, along with Waze, is Mobileye. The Jerusalem-based company developed a system based on artificial intelligence that includes a camera and computer vision capabilities to prevent accidents. It knows when a driver drifts out of lane or gets too close to another vehicle or a pedestrian and can also sense rapid acceleration or deceleration. Now in addition, it is considered a leader in efforts to develop self-driving cars, or autonomous cars as they are sometimes called.

The company is publicly traded at a market value of $9.5 billion and has collaborative relations with major car manufacturers including Audi, BMW, Tesla Motors, General Motors, Hyundai, Renault-Nissan and Volvo.

In addition to Mobileye’s camera-based technology, there is a need for radar and laser technology to improve visibility at night and in fog. Innoviz is a young Israeli startup in the field that is developing sensors and visual processors for use in self-driving vehicles in conditions of difficult visibility. The company is developing a laser sensor that is being used by Google in its autonomous vehicle project, providing a detailed, three-dimensional picture of the car’s surroundings. Founded this year, Innoviz raised $9 million a few months ago.

Another aspect of self-driving car technology involves what is called V2V or vehicle-to-vehicle communications. The field includes two Israeli companies, Otonomo and AutoTalks, which compete with chipmaker NXP. Founded in 2008, Otonomo develops technology related to radio communications among vehicles, with the aim of creating a system in which each vehicle broadcasts its location along with other data on its movement, including its velocity or use of its steering wheel or brakes.

But the connectivity technology in highly sophisticated cars also raises the prospect that hackers could break into various systems. Israel is considered a leader in the field of information security and a number of entrepreneurs have already spotted the potential that the automotive field offers. In fact, five of the eight automotive cyber security companies worldwide are Israeli. The first in Israel was Arilou, in which Israeli firm NNG recently acquired a 60% stake for $10 million. In addition, in January, the global car entertainment systems company Harman International bought another Israeli firm, TowerSec, for $70 million.

And just weeks ago, Diskin announced the creation of his new company in the field, CyMotiv, which he established with two partners in cooperation with Volkswagen, which has a 40% stake in the firm. The company, Diskin said, will without question be run from Israel.