Israeli car startups dream of becoming the next Mobileye
Israel’s Innoviz Technologies announced on Aug. 7 that the Volkswagen Group would buy self-driving software and hardware from the company, as part of a $4 billion deal. Innoviz CEO and co-founder Omer Keilaf released a statement saying, “We are delighted to be working with the CARIAD (Volkswagen Technology Group) team and being a provider of LiDAR sensors and perception software. to support safe mobility for vehicles launched from mid-decade onwards.”
On June 27, Israeli artificial intelligence (AI) chip maker Hailo announced its collaboration with semiconductor supplier Renesas to provide a processing solution they claim will enable advanced driver assistance features. (ADAS) and automated driving systems (AD).
These two agreements are another reminder of the status Israel enjoys in the global automotive and new mobility industry.
The most successful story in the Israeli auto industry is Mobileye, which develops self-driving technologies and ADAS. Its acquisition by Intel in 2017 for around $15 billion remains the biggest exit in the history of the Israeli high-tech industry.
Another Israeli autotech project that made international headlines – Better Place – for the development of battery charging and changing services for electric cars ended in bankruptcy in 2013, but helped establish the local automotive industry.
This industry includes four major sub-sectors: new mobility (carpooling or micro-mobility solutions), autonomous driving, digitalization (vehicles connected to the internet) and electrification..
A report published by Ecomotion last year said that since 2016, mobility startups in Israel have increased by 50%, from 400 companies to more than 600 in 2020. The report indicates that investment in startups in 2020 was around US$1 billion. The investments were distributed as follows: nearly 25% for Israeli automotive startups active in the field of digitalization, 21% for startups specializing in autonomous driving, 13% for new mobility startups, 12% were invested in electrification startups and recall in other automotive-related fields.
The ingenuity of the Israeli auto industry has caught the attention of international corporations. Currently, there are more than 20 automakers operating local innovation and R&D centers in Israel, including Volkswagen, Skoda, Seat, Ford, Mercedes and Renault-Nissan. The first to do so was General Motors, which in 2008 opened a local R&D subsidiary in Israel.
Israel does not produce cars. Historians speak of Israeli attempts in the 1930s and 1940s to develop an Israeli vehicle named Carmel, but these attempts failed miserably. Yet even without a local auto industry, it seems to have become an autotech leader. How come?
Yohay Shinhar is a prominent Israeli automotive expert and consultant for major Israeli car importers. He tells Al-Monitor that an automotive industry requires heavy infrastructure and relatively inexpensive labor – two things that have never been Israel’s strong suit. On the other hand, innovation and original thinking are definitely Israeli hallmarks. “Israel sells technology, and that is precisely what the industry needs now,” he said.
Shinhar further explained the growing number of automakers in Israel, saying that Israel is the “only country in the world” where a 30 square kilometer space is home to hundreds of technology companies, which can meet the needs of automakers.
According to Liav Ben Rubi, CEO of Quantum Hub, a Herzliya-based center aimed at promoting mobility and automotive startups, this industry in Israel is being aided by technologies developed for use in the IDF.
Ami Karasso is the director of OnePR, a media consulting agency specializing in the automotive industry. He believes the global auto industry as well as a number of Israeli tech companies will see a significant breakthrough in the next two to three years. Vehicles that have come out in recent years are equipped with ADAS systems that have reduced the number of road accidents by 40%, he explains. These figures should significantly stimulate the purchase of these vehicles.
Karasso says new vehicles coming to market in the coming years will include new features such as semi-autonomous highway integration. This will require a more complicated sensor system compared to the number of sensors currently in vehicles.
Karasso notes that several Israeli companies are considered world leaders in the field of sensors. He expects these companies to become “famous like Mobileye” with a market value of billions of dollars on the Nasdaq. “No automaker will be able to do without the Israeli sensor industry,” he told Al-Monitor.
Despite the optimistic outlook for the Israeli auto industry, there are also several challenges and obstacles it faces, especially securing new investments. The Ecomotion report mentions that in a survey of mobility startups, almost 75% cited access to finance as a major barrier. A third called it “very difficult”.
This difficulty is apparently why 66% of Israeli autotech startups initially rely on self-funding and government grants, which they can repay once revenues start rolling in.
Ben Rubi told Al-Monitor that automotive and mobility entrepreneurs know that projects in these areas are a long process that can last between three and seven years and therefore require significant funding. But, he said, the market “has sobered up” and investors are looking for quick returns rather than appreciation. Thus, Ben Rubi does not envisage future acquisitions in the incredible scope of Mobileye, but rather several deals at a more “realistic” market value.