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It’s been a stressful few years for the traditional auto industry, given the rise of startups and the expansion of Tesla.
However, some investors hedged their bets easily, sending a check to Autotech Ventures LLC, a Silicon Valley venture capital company focused on the future of transportation. In its five years, it had some pretty major successes, including the first investments in Lyft, DeepScale (acquired by Tesla in October), and Xnor.ai (acquired by Apple in January).
Now Autotech is trying to protect its portfolio from pandemics as it prepares to deploy $ 150 million in a financing round announced this week. We spoke to Managing Director Alexei Andreev to discuss how Covid-19 can change the way we move.
What is your general thesis on the pandemic?
Certain industries are definitely being hit by Covid-19, and we have a fairly representative portfolio. Virtually everything that requires public transportation, we have no idea how or when to recover.
Our hypothesis: We will see quite negative pressure on car sharing and it will be driven by institutional memory. Even if Covid-19 is done and we have vaccines, I think that as human beings we are descendants of those guys who panicked. It was an important survival instinct. We simply evolved to have a little residual fear over a long period of time.
How about on the rise?
We are looking for different offers for companies that make antimicrobial sprays and other things with UV lamps.
Our logistics portfolio is doing very well, especially everything related to last mile delivery and smart warehousing. What we are observing is that instead of going to the grocery store, you are ordering online. I think it’s here to stay. When you have online commerce, someone needs to do logistics. Amazon is clearly a big winner, but we have several companies in this domain.
And then there are companies that pull humans out of the circle. You go online and click, click, click and go.
The pandemic is the most important factor in the digital transformation of companies. People said, “Hmm, we are not sure if we should try.” Now it’s a shock spreading through the system, and the old traditional way of doing things just doesn’t work. People are realizing that we have to have more machines, we need to build robustness, we need to diversify supply chains. The coronavirus accelerated the reorganization of supply chains by 10 times.
What does coronavirus mean for the vehicle electrification schedule?
You can turn oil shale on and off pretty quickly, but real oil, you can’t turn it off or lose your oil field; you must pump. Therefore, I believe that we will have an oil oversupply for the next 18 to 24 months. In the United States, it depends on who will win in November. If Trump wins, it will be the same as always. The cheaper the oil, the less likely it is that people will buy an electric vehicle.
Europe is really interested in electric vehicles, and this coronavirus is a wake-up call for many countries. They say: “Nature is retaliating. We have been abusing it and it is fighting.” My intuition is that China will see an acceleration in electrification and Europe will see an acceleration, because the business model is decoupled from the price of oil. It is more politics and an inner sense of personal responsibility.
And I think Tesla will be fine. I am optimistic with Tesla.
How about autonomous driving technology?
[Original equipment manufacturers] and [major] providers have no money. They just don’t have money to burn anymore. They need to survive, and they are slowing down investments in autonomy. Second, people have generally realized that highway autonomy is much more difficult than expected.We are investors in two autonomous off-road companies. SafeAI, which builds a stand-alone pile for mining and construction equipment, and Verdant Robotics, which builds a stand-alone pile for crops. Think apples, oranges, and peaches. It is all manual work: thinning, spraying, pruning. Can you take the best pieces of autonomy on the road and build robots to replace humans in dangerous or very unpleasant jobs? They are low speed vehicles: you don’t have traffic lights. It is a private land, so it is not regulated. There is a very clear ROI.
Along the way, Google is a dark horse and they have a certain pattern of decision making. Think of Android. No one wanted to take it, but Larry and Sergei saw it as a Trojan horse. What we can see is that in 12 months we will have fully autonomous Fiats and Jaguars and they will increase their market share like crazy. And headlines can become the equivalent of Nokia and Motorola mobile phones. If that happens, we will see a dodo dance; some people will leave like the dodo.
Do you think there are institutional investors optimistic about the technology now that they were not three or four months ago?
There is a joke among venture capitalists that we are a herd of independent thinkers. Overall, we’ve seen a cooling of, say, overall highway autonomy over the past nine months. I don’t see many new rounds of investment closing in this domain. And the strategies now have no money. They used to write those mega checks, but right now everyone is struggling to get liquidity. I expect little or no new funding for quite some time.
Does the pandemic present opportunities where you have no exposure?
Last mile robots are a big problem. We look for deals for Starship Technologies and the guys with small tracking boxes for pizza deliveries. We think, “Oh, it can’t be big.” Now everyone wants to use them, and it’s clearly a radical change in attitude toward last-mile delivery.
Overall, is the pandemic a better argument for personal car ownership?
Yes, but people do not have disposable income, so instead of buying new vehicles, they will buy used vehicles. We will see great success in new vehicles, and there will be incredible incentives to drive vehicles, massive discounts. Companies will operate at zero margins just to have factories in operation. In nine to 12 months, it will be a good time to buy a new car.
This interview has been edited for brevity.
