This $10,000 Technology Can Boost the Driverless Car Market

Driverless cars may roam the roads some day soon, and one new technology may get us closer to this future.

Jun 25, 2014 at 9:31AM

Driverless cars are synonymous with Google (NASDAQ:GOOG)(NASDAQ:GOOGL) and a handful of automakers like Mercedes-Benz and GM (NYSE:GM). But that might be about to change. Cruise Automation, a start-up based in San Francisco, is developing a kit that will allow drivers to retrofit their cars with driverless technology. The company's first-generation Cruise RP­1 will cost just $10,000 -- a fraction of the six-digit price tag most competitors are expected to fetch. The obvious question is: Will the concept revolutionize the auto industry? 

First steps
Kyle Vogt, the CEO of Cruise, recently shared his thoughts on the subject with me. Vogt reveals Cruise RP­1 will first work with Audi's A4 and S4 only, before expanding to other makes in the near future. "We designed the system to be compatible with any car with a steering wheel, gas pedal, and brake pedal," he says. "But we had to choose one to start with, since there's some customization involved and we're a small company with limited resources."


Courtesy of Cruise Automation.

Upon launch, Cruise RP­1 sales will be limited to California in a batch of 50 units. The state will begin issuing driverless car licenses in September, and is on the forefront of legislation designed to eliminate the legal ambiguity that surrounds the technology.

While this is a clear advantage for Cruise, Vogt says his company is focusing on California for logistical reasons, before moving to other markets. He explains:

This kind of technology needs to be extremely safe.  We're doing a limited roll-out by limiting the areas in which the system will operate until we've collected hundreds of passes of each stretch of highway.  We're based in San Francisco so we have enough data to unlock certain stretches of highway in the Bay area, but we haven't collected enough data for other areas yet.
Cruise is currently compatible with two major highways in the California Bay area, though Vogt says it will have "significantly more coverage" in the state when initial installs begin next year. 

Looking ahead
There's no denying driverless cars can transform the auto industry. The potential benefits range from accident reduction to improved productivity, assuming drivers will have more free time on the road. Morgan Stanley, for one, estimates 100% adoption in the U.S. may come within a few decades. That scenario could save Americans at least $1 trillion annually, and global savings may be five times that, according to the company. 

As with all paradigm shifts, though, adoption will likely come in steps. Morgan Stanley outlines four phases, the culmination of which will result in universal usage throughout the country. The U.S. is currently in Phase 1, it says, while Phase 2 and Phase 3 will consist of a transition from existing to driverless tech in cutting-edge areas like California within the next decade. Nissan and GM are just a couple of the automakers who share this sentiment -- both plan to release a version of the technology by 2020.

Given that some experts believe new driverless cars will cost between $75,000 and $100,000, Cruise's $10,000 price point could open the market to value-focused consumers. Even the company's slogan, "Join the Driverless Revolution," seems to imply Cruise gives the everyman a chance to do just that.

The bottom line
As Forbes reports, Vogt calls the company his "true calling," adding, "Americans are complacent that 33,000 people die every year in car accident[s].... We feel like there's this race against the clock." Cruise's mission is a noble one, and if successful, it may ultimately hasten the adoption of driverless cars.

Of course, plenty of questions remain. Will drivers want to shell out $10,000 to retrofit a car that isn't specifically designed for the technology? Will the state and federal legal environment move quickly enough? And perhaps most importantly, will Americans feel comfortable enough to take their hands off the steering wheel?

The answers will be revealed in time. But for my money, I'm optimistic. Everything from the personal computer to tablets faced criticism before they were released, and driverless cars may be more revolutionary than both. Thanks to Cruise, the U.S. may be even closer to a future where roadway safety and driver productivity are markedly improved.

How to invest in the driverless car revolution
Now you understand the shift that's under way in the auto industry. But would you like to take advantage of this knowledge? The beauty for investors is that there is an easy way to invest in the driverless car revolution. Click here to access our exclusive report on the company behind the technology.

Jake Mann has no position in any stocks mentioned. The Motley Fool recommends General Motors and Google (C shares). The Motley Fool owns shares of Google (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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