Tesla/Mobileye: assisted driving car chase speeds up

Driverless cars have slowly begun to appear on the roads of American cities. As they become a reality, some of the hype surrounding the sector is settling down. Expectations for Intel’s Mobileye spin-off have been lowered. Once imagined as a $50bn company, the autonomous driving business is now expected to seek a valuation of about $30bn. Meanwhile Tesla has acknowledged that its “Full Self-Driving” software rollout will be slowed by the need for regulatory approval.

Advanced driver-assistance systems take control of driving functions such as emergency braking and maintaining speed. It is a stepping stone on the way to fully autonomous vehicles. Mobileye, which makes chips and software for assisted driving systems, is ahead. Of more than 100mn vehicles on the road with camera-based ADAS, most contain Mobileye software, according to Guidehouse Insights. Mobileye says that its systems will be used in another 266mn vehicles by 2030.

Intel bought the Israel-based company in 2017 for $15.3bn. Sales growth has outpaced the parent company. But Mobileye accounted for about 3 per cent of group revenue in the past quarter and has done little to support Intel’s falling valuation. It does not fit into Intel’s efforts to improve manufacturing technology in order to better compete with rivals such as Advanced Micro Devices. A listing will provide Intel with capital for its expansion plans. It is smart to keep majority ownership of the business, retaining shares with 10 times the voting rights of those it sells.

At $30bn, lossmaking Mobileye would be valued at 22 times trailing revenue. On the same metric electric carmaker Tesla, which Mobileye sees as a rival in the consumer autonomous vehicle market, is valued at 14 times. Tesla’s valuation dipped slightly on disappointing delivery numbers in the past quarter. Though at 343,830 vehicles, it delivered some 200,000 more than in the same quarter two years ago.

Part of the valuation of both companies rests on longer-term plans to create fleets of autonomous vehicles. Until robotaxis are deployed, however, such aspirations remain difficult to price.