The automotive sector has been hit hard by Covid-19, but even before the pandemic the industry was in a state of flux. Disruptive trends such as autonomous driving, connected vehicles and electrification have pulled in significant investment as start-ups vie to play a key role in the future of the automobile.

One company hoping to be in the driving seat for part of this revolution is AIMotive. The Budapest-born research and developer of software and hardware technologies connected to automated driving has caught the eye of investors.

After raising $20m in a round of funding in June 2020 – led by Lead Ventures and including existing corporate backers – AIMotive is planning to push into new markets as it seeks to carve its niche within the automated driving revolution.

State of play

As the car shifts away from being purely mechanical to an increasingly digital platform, large car manufacturers are keen to have access to the latest technology to bolster their position in the market.

Mike Ramsey, an analyst covering the auto sector at research firm Gartner, says that despite wanting to get into the automated space, traditional carmakers typically lack the necessary software development skills.

“Although [the sector] has changed dramatically over the last five or six years, there’s not a huge depth of talent available in this area,” he says.

Tech start-ups are hoping to tap into this gap in the market, with the automotive software market projected to double to $84bn over the next decade, according to a McKinsey report published in July 2019.

Autonomous driving is just one part of this overhaul, with an estimated $75bn of investment expected to enter the space between 2019 and 2023, according to consultancy Alix Partners. 

AIMotive’s niche

AIMotive, which has raised $70m to date, serves three parts of this growing market, with its AI-powered software, automated driving simulation tool and neural network acceleration hardware.

These products fit within advanced driver assistance systems (ADAS), which provide solutions such as stopping at red lights and emergency braking, and are one step towards fully autonomous vehicles, or so-called level 5. 

The company’s CEO László Kishonti, says AIMotive distinguishes itself from its competitors by “working with everyone”, allowing all kinds of automotive companies to choose from its suite of products and services. 

“One of our investors told me that we are like an arms dealer in this race. We let customers cherry pick our solutions and don’t pressure them to use everything,” he adds.

With big name investors behind the company – such as the venture capital arms of technology giants Samsung and Cisco, and engineering powerhouse Bosch – AIMotive has both the capital, expertise and internal corporate markets to facilitate growth.

Mr Kishonti says its corporate backers bring invaluable “experience to the table”, especially in the boardroom, and some have even become customers. 

Ingo Ramesohl, the managing director of Robert Bosch Venture Capital, which has invested in AIMotive in several of its funding rounds, says the company is the only start-up they are aware of that offers a full automotive grade software and hardware solution that is compliant with industry standards.

“AIMotive has one the worldwide best teams in that segment and has one of the best software and hardware products to offer on the market,” he says.

Expansion plans

Helped by its investors and funding, AIMotive is hoping to add to its current global workforce of about 200 people by adding to its existing global footprint – including headquarters in Hungary, and offices in Silicon Valley, US and Yokohama, Japan.

It has set its sights on the big automotive hubs of Munich and Detroit as it seeks to get closer to its automotive customers.

“The basic goal is that we need support teams where the [automotive] customers are and where the customers require local help and support,” says Mr Kishonti, who says that having a local presence will also remove any constraints caused by different time zones.

In common with other fast-growing tech companies, AIMotive is unlikely to move its research and development operations from its Budapest headquarters, opting to only expand its sales, marketing and support operations abroad.

Gartner’s Mr Ramsey says this strategy makes sense, adding that Detroit is the “engineering epicentre of the global auto industry” because of the prevalence of major automakers in the US city.

But for AIMotive to scale, Mr Ramsey contends they will need to make strategic decisions on what they are working on – whether to be a vendor that sells their own automated driving product or a consultancy that helps other people build a product.

Covid curtailment

While applications of automated driving range from so-called robotaxis – cars that chauffeur passengers through complex road networks without anyone at the wheel – to unmanned delivery vehicles, the roadmap for vehicles to become fully autonomous remains uncertain.

Mr Ramsey says that “there has been a move towards industry consolidation and realignment of expectations to when the technology will actually be commercialised”. 

Amazon acquired self-driving start-up Zoox in June as the US tech giant seeks to develop an autonomous fleet of delivery vehicles. Other major US companies with a foothold in the evolving mobility space include Alphabet with its Waymo self driving start-up, as well as General Motors, Honda and SoftBank-backed Cruise Automation.

Analysts expect fully autonomous vehicles within the next 10-20 years, although Covid-19 has had an impact. The pandemic had not slowed down the development of autonomous driving, Mr Ramsey says, but rather “shifted the attention more to logistics from human autonomy”.

Depressed light vehicle car sales – which are predicted to fall between 15-20% this year compared with 2019, according to S&P Global Ratings – are also set to change the way automakers develop their technology.

Mr Kishonti hopes the slump could work out in AIMotive’s favour: “I believe that these budget cuts will make larger corporations rethink their strategy, with only a few of them able to keep everything in-house.” 

“We think that there will be a demand for sharing some of the workload and outsourcing to companies like AIMotive.”

This article first appeared in the October/November print edition of fDi Intelligence.