It wasn’t too long ago that the “Israeli automobile industry” would have been laughed off as an oxymoron. Except for a brief and largely forgotten foray in making cars with fiberglass bodies during the 1950s and 1960s, Israel was content to import its wheels. The domestic market was tiny, there was no heavy industry to build on and little relevant engineering talent.
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But the world of automobiles is undergoing rapid change, and Israel has quickly carved out a major piece of the new industry, as attested by Intel’s announcement on Monday that it would be buying Mobileye for more than $15 billion.
Like the scores of auto-tech companies in Israel, Mobileye doesn’t involve itself in engines or design, but excels in the complicated science of getting a vehicle to drive itself – a hot new technology that has got traditional auto makers contending with tech giants like Intel and Uber over who will rule the road of the future. In the contest for the best technology, Israel has become the place to go.
“Something new is happening. Israeli companies are succeeding, automakers are coming here and want to work with us and this is attracting more money to the industry. The Intel-Mobileye deal is another injection of energy into this circle, and could boost the possibilities for the local industry even more,” says Boaz Mamo, CEO of Drive, a smart mobility innovation center and incubator launched in Israel last month in partnership with automakers Honda and Volvo and rental car company Hertz.
The stakes are enormous: Last year, Goldman Sachs projected the market for advanced driver assistance systems and autonomous vehicles would grow from about $3 billion in 2015 to $96 billion in 2025 and $290 billion in 2035.
While the auto industry itself has long been concentrated in the United States, Germany and Japan, Israel has become a destination for auto manufacturers and technology companies that have been impressed by the rise of companies like Waze (which was bought by Google for close to $1 billion) and Mobileye, as well as Israel’s record of generating successful startups and innovations.
Driverless cars were regarded as something of a distant fantasy until a few years ago, when companies like Apple and Google announced a vision to manufacture autonomous vehicles. Although Google is not currently pushing development as hard as it did initially, its plans were enough of a perceived threat to send traditional automakers into a panic over the possibility that they could lose their business to tech companies.
Those worries set off a wave of strategic collaborations between automakers and the companies developing smart systems – including vision-processing companies like Mobileye, mapping companies and firms working on linking vehicles to the cloud. Others were founded to develop tools for protecting smart cars from cyberattacks.
In Israel, dozens of entrepreneurs saw the potential of this new market, and today more than 100 companies are developing a range of technologies for the auto industry. While the Mobileye deal dwarfs them all, it is by no means the first tie-up between an Israeli company – nearly all of them are startups – and a leader of the global auto industry.
Last May, Volkswagen invested $300 million in Gett (formerly GetTaxi), whose app connects users with rides and offers a delivery service. In November 2016, Germany’s Daimler AG, the maker of Mercedes Benz, announced it was opening a research and development facility in Israel, along with plans to collaborate with local startups in the field. The company also announced a collaboration with the Israeli chip manufacturer Valens. General Motors opened its R&D center in Herzliya back in 2010.
Last July the Israeli company NGG, developer of the iGO navigation app, bought 60 percent of Arilou Technologies, the first Israeli company to specialize in cybersecurity, for $10 million.
In August, the Israeli company Saips was sold to Ford for tens of millions of dollars and a month later Volkswagen bought a 40 percent stake in CyMotiv, the new cyber company created by former Shin Bet security service chief Yuval Diskin, Tsafrir Kats and Dr. Tamir Bechor. A year ago, another such company, TowerSec, was bought by Harman, an American firm specializing in car infotainment, for $70 million.
Before this week’s deal with Intel, Mobileye was collaborating with a host of global leaders – and under the terms of the accord it will maintain those relationships. Mobileye was an early supplier of vision systems for the electric car maker Tesla. Although the two companies had an acrimonious and public breakup last summer, Intel formed a partnership with the German automaker BMW to put a fleet of around 40 self-driving test vehicles on the road in the second half of this year.
Mobileye had teamed up with Intel for its fifth generation of chips that will be used in the fully autonomous vehicles scheduled for delivery in 2021. It also has partnered with Delphi on a self-driving platform that is being shopped to smaller car companies that may not have the resources to develop their own systems.
The main technologies of interest to the automotive industry involve computer chips, communication, big data and analytics, complex artificial intelligence capabilities and technology for neutralizing potential cyberthreats. Smart technologies are already available in most state-of-the-art vehicles, and every month thousands of cars with limited automated features are sold.
In addition to Mobileye’s camera technology, companies are developing radar and laser systems to improve night vision and vision in foggy conditions. Two Israeli startups that entered this arena in the past year are Innoviz, founded by Omer Keilaf, Oren Rosenzweig, Oren Buskila and Amit Steinberg, and Oryx Vision, started by Rani Wellingstein, a founder of Intucell. Both companies are developing sensors and image-processing systems that facilitate autonomous driving in difficult conditions. It will be interesting to see if and how the Intel-Mobileye deal influences their activity in the long term.
Drive’s Mamo says that Israel’s lack of an auto industry is something that has worked in its favor.
“The world is going through a dramatic change, and along with the technological innovations, new business models are arising,” he says. “Israelis don’t have a tradition of an old and heavy auto industry, so there was no traditional industry lobby here. This is one reason for the rise of a whole slew of new companies that are looking at the automotive field from a different angle.”
“At the same time, while automakers used to be slow to adopt new technologies, they now understand that they have to do everything quickly and see Israel as a center of innovation in the field,” Mamo adds.
The fact is, even tech companies have found it challenging to pioneer the field. Although it has invested in at least half a dozen start-up companies developing different components for self-driving systems, from robotics to sensors, Intel has not been a significant player in the sector. But, having missed the boat on the mobile revolution, the U.S. semiconductor maker was determined to ensure it has a place in the automobile revolution now underway – and paid a hefty a premium of 60 times Mobileye’s earnings.
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The Israeli auto tech startup Nexar, which developed an app with a computerized vision warning system to help drivers avoid accidents, went into operation on Israeli and American roads last year. Nexar’s app uses a smart camera that can calculate the odds of a driver getting injured by identifying and warning him about dangerous vehicles and situations. For example, it can alert a driver that another car that is braking abruptly 200 meters ahead, thus preventing a multiple-vehicle collision. The system builds a “risk profile” for every vehicle, road and intersections, along with other factors it includes in its calculations. The information collected by the app is also useful for insurance and towing companies, city emergency hotlines and companies developing autonomous cars.
Another Israeli company that has taken off quickly is Otonomo, which was founded in late 2015. The company is developing a program that operates in the cloud and enables millions of cars and drivers to connect to hundreds of apps and services. Otonomo’s technology is aimed at the market for “connected cars,” an interim stage in the auto industry on the way to developing fully autonomous cars.
Car cybersecurity is another area in which Israeli companies are distinguishing themselves – most of the world’s car cybersecurity firms are now Israeli. Besides TowerSec, other big Israeli names in car cybersecurity are Argus, which has raised $30 million to date, and Karamba Security, which was founded in 2015 and is developing a product that will enable companies to protect their cars from threats from the Internet or via Bluetooth.
With reporting from Reuters.