
Honda-Waymo Talks Are Said to Have Faltered on Tech Access - Fricken
https://www.bloomberg.com/news/articles/2018-10-05/honda-waymo-talks-are-said-to-have-faltered-on-tech-access-evs
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ams6110
_Honda had an existing partnership with GM to develop fuel cells. The Detroit
automaker has its Chevrolet Bolt EV in showrooms and has developed a battery
pack that will be used in 20 new EVs globally by 2023. In June, the companies
announced a deal that would have Honda using GM’s cells and battery pack. GM’s
battery not only had good range, but by working together the two automakers
figured they could lower costs._

The thing about companies like Honda and GM -- they have a lot of momentum.
That means they aren't likely to be on the forefront of innovation, but when
they turn towards a new target, they will hit with massive resources and
established global production capacity that a start-up can only dream of.

~~~
dsfyu404ed
>The thing about companies like Honda and GM -- they have a lot of momentum.
That means they aren't likely to be on the forefront of innovation, but when
they turn towards a new target, they will hit with massive resources and
established global production capacity that a start-up can only dream of.

Exactly. It's the difference between a handful of dudes in a speedboat with
some explosives and an aircraft carrier. Once the latter is aware of the
former you can be reasonably assured who of will win. At most the former can
hope to land a good sucker punch before the latter knows they're even
fighting.

The core competency of GM, Honda, etc. is building cars. Once they decide what
kind of cars they want to build they will do a good job building them as they
intend to build them. They don't make rookie mistakes, especially in the
logistics of spinning up production lines to build what they want to build.
They've re-tool their factories every time a new generation or a new model
comes out. They know how to do it right the first time, knowledge that comes
from experience.

~~~
leesec
They are good at building cars, but I would argue they are not good at
building tech. Self driving is a technology issue. If the tech superstars at
Waymo/Apple/whoever aren't even close to solving it, why would the software
people at GM/Honda be?

~~~
dsfyu404ed
"Hi, this Jane from the procurement department of GM North America. We might
be interested in licensing your software. Please give me a call back so we can
set up a meeting."

They don't need to build tech. They can buy it. GM can write some pretty big
checks. They flat out bought Cruise just to cover their butts.

When I was an intern at a defense contractor ~1/10th the size of GM my cube
was across from procurement. I think a lot of people here don't understand the
kind of scale companies like this play at. Your problem isn't "how do we pay
for this" it's "will anyone sell me all this all at once or sign a contract to
provide it all over the timetable we want". You make bets on how many times
around the earth the welding wire you'll buy next quarter will go. GM shipped
~10 million vehicles in 2017. That means they had to sign a contract with
someone to supply approximately an Exxon Valdez worth of motor oil and another
of ATF just for their factories.

~~~
xiphias2
Waymo is far the best self driving tech and nobody has the money to buy it, as
Alphabet is not selling (it's the first real diversification from ads
revenue). GM is few years behind, but hopefully those few years are not enough
for Waymo to create a monopoly.

~~~
dekhn
I think cloud is google's first real diversification from Ads. Nobody looks at
Waymo as a revenue center.

~~~
erikpukinskis
Waymo is Google’s first AI robotics spinoff. That’s supposedly a (young)
growth market.

~~~
dekhn
Supposedly. I am skeptical that Waymo will ever execute a major deal. It's a
real shame, the tech is really good, but Waymo just isn't very good at
business (this is true about Alphabet in general; beyond ads, and maybe
cloud).

~~~
praneshp
XXX is not very good at business, except <several billion dollar product> and
<several billion dollar product>.

~~~
smt88
They have tried and failed multiple dozen times to create new products.
They're bad at business.

~~~
erikpukinskis
You could say maybe they’re bad at startups but good at growing established
products.

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dwighttk
saved you a click: Waymo didn't want to share any of its software with
Honda... Honda may not have been ready to provide EVs on the scale Waymo
needed.

~~~
noja
So Waymo dumped Honda? They both dumped each other? Weird headline.

~~~
dwighttk
Seems like Honda dumped Waymo due to the tech sharing issue (that was
presented as the breaking point, I guess you could say Waymo dumped Honda
because they demanded sharing Waymo was never going to give, but it was Honda
that signed a new deal with another company.) Perhaps Waymo would have been
willing to bend on sharing if Honda were geared up and ready to provide EVs.
It's not clear.

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samfisher83
>One person familiar with the talks said that Waymo wanted Honda to supply
electric vehicles -- an area where the automaker is just beginning to
establish itself. All of Waymo’s existing partnerships supply EVs or plug-in
hybrids because its autonomous driving system needs more power than the puny
12-volt batteries in conventional cars.

I hope they realize that there is an alternator generating power.

~~~
danans
> I hope they realize that there is an alternator generating power

The power output of an alternator is a function of the engine RPM, so it can't
be relied on to provide consistent power, even when the engine isn't running,
as needed by autonomous driving systems. You need a sufficiently specced
battery (capacity, power output,etc) in between the ultimate power source
(alternator, grid) and the autonomous system, something that EVs and PHEVs
provide by default.

Most electrical functions in a car (radio, windows, fans) are designed to
operate within the power output of the battery, not the maximum output of the
alternator.

The functions that can't fit within that capacity (i.e A/C compressor) are
mechanically coupled to the engine output, and therefore shut off when the
engine shuts off.

EDIT: wording

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dsfyu404ed
If you're choosing a car to build into a self driving test fleet electrical
capacity is a really low priority because it's so easy to fix yourself if need
be. There's nothing preventing Waymo from bolting a group 31 (big, cheap
battery sized used in commercial trucks) down beside whatever over-engineered
enclosure holds your self driving computer.

~~~
danans
Waymo presumably already has ways of modifying vehicles used for autonomous
driving tech development, perhaps with big cheap batteries.

But for a self driving taxi service fleet, you wouldn't want your customers
rolling around in vehicles with a big cheap truck battery bolted inside it.

You need a battery that is well integrated into the vehicle, for safety and to
optimize the customer experience.

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dev_dull
> _For one, Waymo wasn’t willing to share the substantial technology it had
> already developed to run autonomous vehicles, and was seeking to cut a deal
> that would focus on Honda providing the cars_

Oddly enough, what they walked away from is exactly what I want! I want Google
to be the OS for the car, not some snowflake solution from each car
manufacturer.

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Animats
Waymo seems to be linked with FCA right now. They've picked their auto company
for this round and they are headed for first operational vehicles with no
safety driver around the end of 2018. Dealing with Honda would be a
distraction at this moment, just before shipping product.

~~~
kqr2
Why do you think Waymo chose FCA (Fiat Chrysler Automobiles) since they are
only the 8th world's largest car maker? Is Waymo really the leader in the
field (valuation over $100 billion vs Cruise at ~$15 billion)? Should they be
partnering more with car companies ala Cruise / Argo?

~~~
jhayward
FCA is somewhat infamous for not funding R&D so it's likely that in order to
stay in the game they gave Waymo extremely generous terms with respect to IP
and data.

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djanogo
No hardware manufacturer should partner with Alphabet unless they have
exclusivity contract or equity in tech, otherwise Alphabet would just use to
subsidize proof of concept first production relationship to sign up more
manufacturers.

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harigov
It seems to me that Waymo is following a model similar to Android albeit
charging for it instead of giving it away for free. Anyone with basic
understanding of technology knows that its not a sustainable model, in the
long term. I wouldn't blame Honda for thinking for itself.

~~~
zmarty
"Anyone with basic understanding of technology knows that its not a
sustainable model" -> Please explain this. I have a basic understanding of
technology and this is not obvious to me.

~~~
martythemaniak
Right now, Waymo looks like it wants other companies (Honda, Chrysler, Jaguar)
to provide it with dumb boxes on wheels. Waymo wants to play different dumb-
box-on-wheels providers against each other so it can get the cheapest box-on-
wheels.

Waymo then installs it's fancy software on these boxes and uses it's Google
connection (Maps, Waze, etc) to put people in those boxes and charge them a
hefty profit, at least for a few years while it's the only provider. Waymo
wants to be in control and collecting profits, while manufacturers subsist on
small margins.

Obviously, this isn't a good situation to be in for Honda etc

~~~
notatoad
It doesn't seem that unreasonable for waymo to expect that car companies would
want to sell cars - that's what Honda has been doing for the last 60 years.

~~~
tyingq
If you fast forward, and assume that at some point most cars would be self
driving, then you can see why Honda would want to sell more than just the dumb
parts.

~~~
potato1234
Aren't cars today mostly "dumb" boxes anyway? (And yet there seems to be
enough competition in the field)

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tyingq
I'm thinking what sells will be different when most cars are self-driving. For
one, most people probably won't own a car. The buyers will be companies like
Waymo, Uber, and Lyft. That's a very different dynamic. Basically saying Honda
doesn't want to sell a commodity with small margins.

If you're just hailing a ride, you care a lot less about the brand of car and
it's amenities. You care more about the overall ride share service, price,
etc. Very little of which Honda would have any effect on if they don't have
some skin in the self-driving tech.

~~~
potato1234
True, it might squeeze the profits from some car manufacturers.

I do see a future in very high end & privately owned cars, which will quite
possibly generate even higher margins for some manufacturers. Plus there will
be a whole new world of innovative design opportunities in the self driving
cars realm, in which the self driving part might end up being be the boring
and somewhat commodity part.

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HillaryBriss
> _a deal announced this week in which Honda pledged to put $2.75 billion into
> Cruise in exchange for a 5.7 percent stake, valuing the company at about
> $14.5 billion._

I'm not seeing how their arithmetic works.

2.75/14.5 =~ 19%

~~~
tyingq
They omitted some info.

 _" Honda will take a stake in GM Cruise for $750 million and spend $2 billion
more over 12 years to develop a self-driving vehicle for the GM unit that can
be "manufactured at high volume for global deployment"_

Although 750/14500 isn't 5.7% either, but at least in the ballpark.

~~~
HillaryBriss
thanks for clarifying that. so, the equity stake was at a much more reasonable
price than i initially thought.

elsewhere in the article they mention that JP Morgan valued Waymo at something
like $100 billion. also they say that Alphabet has plenty of cash. so, it
seems reasonable to assume that Waymo didn't need cash from Honda.

more interestingly, Waymo doesn't seem to place much value on Honda's
production capabilities and other expertise.

is Waymo embracing a sort of scorched-earth business plan? does Waymo have any
true equity partners?

~~~
count
Alphabet is historically horrible at dealing with enterprise businesses...

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Eridrus
Its pretty obvious that Waymo wants to make car hardware a commodity, and car
companies don't like that and want autonomy to be a commodity.

I don't really know where Cruise is at, but it's not crazy to believe that
both things will become commodified and competition will be on cost of rides,
at least in rich urban markets.

At that point, the question becomes: who survives that transition?

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perpetualcrayon
I think sure, there might have been a better deal between GM and Honda, but I
think at a deeper level it's probably different industries trying to "circle
the wagons" so to speak.

My guess is only outsiders in the auto industry will create deep partnerships
with big tech. I think big tech will probably end up being forced to move into
manufacturing through grass roots efforts or acquisitions if they truly want
to compete in this space.

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remir
That may be a bit naive on my part, but perhaps automakers should form some
kind of alliance and develop self-driving tech together instead of buying it
from another company.

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dphack
Normally with new technology, I'd expect hungry entrepreneurs to jump in the
fray and develop alternatives to these huge established companies, but with
self-driving cars, it seems that the barriers to entry would be too high. I'm
hoping I'm wrong though and we see more Elon Musks types out there in the next
decade giving us self-driving cars and competing with these giants.

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glenrivard
Would be pretty amazing to see the car makers gang up and basically not sell
Waymo cars at scale. Hard to imagine that happening.

Ten years ago Jaguar and Land Rover was sold to Tata for $2.8B USD. Waymo
parent, Alphabet, has over $100B in cash with less than $5B debt.

So if they want could just buy a car line.

Ultimately cars will change for self driving and you really want to ultimately
be making those cars.

Safety and durability will be far better when you align ROI with running a
large fleet of cars.

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romed
Tl;dr: Waymo did not need them and Honda needed somebody.

