The Race to Build Autonomous Cars Will Be Costly

Losers stand to spend billions on development, then buying technology from the winners anyway.

Daimler

In the early days of the automotive industry, there were hundreds, even thousands, of small manufacturers all over the country. Most of these companies either shut down or were absorbed by other companies, which continued to grow and grow until they became the big 2.5 that we have today. Bloomberg suggests that the race to bring the first autonomous cars to market will go the same way, with losers spending billions of dollars in the attempt to develop technology that they'll end up having to purchase from more successful competitors.

Numerous auto manufacturers are pushing to be the first to introduce models with fully autonomous capabilities. Some, such as Tesla, already have all of the hardware on board their latest models, but the software that will allow the car to drive itself must be fully developed and legalized before it's unleashed on public roads. Everything from basic driving skills to handling toll booths designed for humans to emergency maneuvering must be taken into account in the programming. And it's not just auto manufacturers in this battle. Technology companies such as Apple and Alphabet are also in the game, leveraging their hardware and mapping solutions that they would love to see become standard issue for autonomous cars.

In the end, just like the human industry for human-driven cars, only a few companies will thrive–namely, the companies that are chosen to be the standards for autonomous cars. Other manufacturers that don't make the cut will end up having to buy the standard technology from these companies, despite having already spent billions to create their own. Fortunately for them, it's unlikely that the large companies involved will go away completely like the numerous small auto manufacturers did 100 years ago.

It's too early to make any predictions as to who will win this contest. The industry changes practically daily, and no one knows who's going to come out with what nifty gizmo next. But over the next few years, technology will improve, costs will drop, and we'll start to get a better idea of what the long-term future of autonomous cars will look like. For now, all we can do is hang on for the wild ride.