What happened

Shares of Israeli automotive sensor-maker Foresight Autonomous Holdings (NASDAQ:FRSX) were trading sharply higher on Tuesday. The company's stock has surged since it said last week that it has begun a pilot project with a major Japanese automaker.

As of 1:30 p.m. EST, Foresight's shares were up about 25.1% from Friday's closing price.

So what

Foresight has two subsidiaries, both of which are focused on automotive future tech. The first, Foresight Automotive, focuses on machine-vision systems for vehicles; the second, called Eye-Net Mobile, is working to develop so-called V2X (for vehicle-to-everything) technology. V2X systems allow vehicles to automatically sense and communicate with one another and with smart infrastructure, which in theory will help reduce collisions and traffic jams. 

A Foresight Automotive all-weather machine-vision system mounted on a vehicle's roof rack.

Image source: Foresight Autonomous Holdings.

Foresight the holding company said last week that Eye-Net is beginning a pilot program with a big Japanese automaker to test its V2X system in the automaker's "smart city" project. While Foresight didn't name the automaker, auto investors have noted that giant Toyota (NYSE:TM) has been building a 2,000-person "smart city" near Tokyo to test autonomous vehicles and related technologies, including V2X. 

That's why the stock has surged since Foresight's announcement last Wednesday.

Now what

To be clear, investors should proceed with caution: While there's a good chance that Foresight's client is in fact Toyota, we don't know that this pilot program will lead to a commercial contract. In fact, it's quite possible that the automaker is not only evaluating V2X technology but also several potential suppliers of V2X hardware and software.

We might find out more when Foresight reports its fourth quarter in full-year 2020 earnings, likely in the first half of March.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.