Back in May, Google (NASDAQ:GOOG) (NASDAQ:GOOGL) captured the public's imagination with a plan to put 100 driverless cars on U.S. roads by next year. 

While that was a fascinating idea, Google's driverless cars can only drive on a limited network of roads with a top speed of 25 mph. Google also has to map out the roads in advance, like a more detailed version of Street View, to account for curbs, signs, and other obstacles. The process is very time consuming -- Google has yet to map 99.95% of all U.S. roads in this manner.

Google's driverless cars. Source: Google.

Yet there is certainly a painful need for autonomous vehicles. Fatal car accidents in the U.S. claimed over 35,000 lives last year. The top causes were drunk driving, speeding, and distracted driving -- all three of which could have been avoided with self-driving vehicles.

Instead of waiting for Google to map the entire world with "smart grids" designed for autonomous vehicles, many automakers have installed collision avoidance systems which allow their cars to "read" their surroundings instead. While these cheaper systems can't help cars change lanes or merge into freeway traffic like Google's prototype vehicles yet, they are realistic, regulation-friendly stepping stones toward autonomous vehicles.

The top company to watch in this market -- which represents a half-way point between regular cars and driverless ones -- is Mobileye (NYSE:MBLY), an Israeli maker of collision avoidance systems which went public on Aug. 1. The company, which now has a market value of $6.9 billion, could also be a perfect match for Google.

Why Google should keep an eye on Mobileye
Mobileye's monocular camera magnifies images, then uses software to calibrate how much time is needed to brake to avoid a collision. An alarm goes off if the driver gets too close, and the system can automatically hit the brakes if it is connected to the vehicle's braking system. 

Mobileye's newer system, the Advanced Driver Assistance System (ADAS), can detect pedestrians, cyclists, debris on the road, barriers, and construction zones. It can also analyze traffic lights and road signs. The system works through a combination of forward-facing cameras and low-cost radars. Mobileye says that ADAS will be available in 237 car models from 20 original equipment manufacturers, including Ford, General Motors, Chrysler, and BMW. According to the company, 90% of leading automakers are lined up to install the company's systems.

BMW's i3 comes equipped with Mobileye's collision avoidance system. Source: BMW.

Mobileye certainly has the numbers to back up that claim. The company reported net income of $19.9 million in 2013, reversing two previous years of losses. Revenue more than doubled, year over year, to $81.2 million. The company's long-term prospects look bright as well. Research firm IHS predicts that the market for automotive chips will rise 6.1%, year over year, reaching $27.9 billion by the end of this year. Within that market, sales of automated driver-assistance systems, like the ones Mobileye makes, are expected to rise an average rate of 13% annually to 2020. 

Mobileye's crash avoidance systems, which start at less than $1000, are much more affordable than Google's cars, which are outfitted with up to $150,000 in extra equipment. Thanks to that price difference, Mobileye believes that it can make driverless cars a firm reality by 2016. That's much earlier than other forecasts -- Robert Hartwig, president of the Insurance Information Institute, believes that fully driverless vehicles will be a common sight on U.S. roads by 2028-2032. Major automakers like Nissan and Daimler's Mercedes-Benz plan to launch fully driverless vehicles by 2020.

The Foolish takeaway
All things considered, Mobileye -- which has already climbed nearly 30% from its IPO price of $25 -- could be very attractive partner or acquisition target for Google.

If Google acquires Mobileye, it will have three key ways to conquer the "smart car" market -- Android Auto infotainment systems, driverless cars, and accident-avoidance systems to bridge the gap between regular cars and fully autonomous ones. Considering that only four states -- California, Florida, Michigan, and Nevada -- allow driverless cars on the road, acquiring Mobileye would allow Google to ease into, instead of diving headfirst, into the driverless cars market.

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.