May 24, 2024

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Motional CEO Karl Iagnemma (Hyundai Motor Group)

Hyundai Motor Group's joint venture Motional announced staff reductions and a two-year delay to its driverless taxi service plans last week, following the group's 1.29 trillion won ($941 million) injection into the startup earlier this month, reflecting growing industry pessimism about the viability of self-driving cars.

Hyundai established Motional with Aptiv in the US in 2020 and launched its Ioniq 5-based robo-taxi service with Uber and Lyft last year. However, the rollout of the second-generation, fully autonomous service based on the Hyundai Ioniq 5 has now been postponed to 2026 -- two years later than initially planned.

This delay includes halting current operations such as taxi services in Las Vegas and delivery services for Uber Eats in Santa Monica, all of which currently require a human safety operator. According to the company, the services have completed more than 100,000 rides in Las Vegas and food deliveries in Los Angeles.

"Large-scale driverless deployment will not happen overnight. Driverless vehicles will enter the market when the technology has evolved and -- just as importantly -- when the business case for autonomous deployment is clear," Motional CEO Karl Iagnemma said in a blog post on May 7.

In light of these changes, Motional plans to redirect its efforts toward enhancing its core technology while conserving capital. Employees were informed that the high operational costs and expensive components required for autonomous vehicle technology are currently making the business model unsustainable.

This restructuring follows Hyundai Motor Group's recent investment of 1.29 trillion won into Motional announced on May 3. The investment was part of a broader deal that included purchasing a portion of Aptiv’s stake in the joint venture. Specifically, $475 million of the investment is allocated directly to Motional, while $448 million was used to acquire 11 percent of Aptiv’s equity interest in the company.

Motional has reported substantial net losses over the past three years, totalling approximately 2 trillion won. Hyundai’s latest investment values Motional at $4.1 billion, unchanged from its valuation in 2020.

“The disengagement rate, a measure of how often an autonomous vehicle requires human intervention, has been steadily declining," Jeon Chang-hyun, a researcher at Daishin Securities, explained. "However, the pace and progress have noticeably slowed since 2020. If autonomous driving technology is 90 percent complete today, it could require exponentially more effort and cost to achieve the remaining 10 percent.”

Tesla, a pioneer in autonomous technology, still continues to push forward aggressively. CEO Elon Musk announced on social media platform X in April that Tesla plans to unveil a fully autonomous robotaxi service with full self-driving capabilities by Aug. 8. This move aims to revive its recently sluggish electric vehicle segment.

Jeon noted that Musk's announcement could rejuvenate interest in the autonomous vehicle industry. “Elon Musk's countdown to unveiling his robotaxi is reigniting a stagnant industry. There is still significant business potential in autonomous driving technology. We value Tesla’s full self-driving subscription and robotaxi business alone at approximately $32.2 billion, accounting for around 70 percent of the company’s current market capitalization,” he said.

Meanwhile, US prosecutors are investigating whether Tesla has misled investors and consumers about its vehicles' self-driving capabilities, considering potential securities or wire fraud charges.

By Moon Joon-hyun (mjh@heraldcorp.com)