Tesla’s Recent Move Could Spell Trouble for Mobileye (MBLY)

Tesla and Mobileye once worked together to bring what's probably one of the greatest inventions of the last 100 years, a self-driving car. However, their relationship has ended and Tesla’s recent move could spell trouble for the Israeli-based firm.

Mobileye MBLY

Mobileye NV (NYSE:MBLY), along with other major name automakers who have been competing to create the first fully autonomous car, has been integral as a tech company in the introduction and development of vision-based advanced driver assistance systems in self-driving vehicles in recent years. Tesla Motors‘ (NASDAQ:TSLA) technology depended primarily on Mobileye’s camera and image processing system to control the vehicles it manufactured.

However, an unfortunate accident involving a Tesla Model S sedan happened last May. It took the life of the driver who hit a trailer-truck while using the car’s Autopilot feature. This led to the break-up of Tesla and Mobileye’s relationship.

Last Sunday, Tesla CEO Elon Musk announced that the company is getting ready to release the most-awaited new version of their autonomous driving software. Tesla cars manufactured since 2014 have been equipped with radars. These were initially used to cross-reference the images caught by Mobileye’s camera. With the updates in Autopilot 8.0, Tesla cars will mainly use the radar systems for the autonomous driving technology. The OnBoard Nvidia Processor powers the software.

In a blog post Tesla indicated that “After careful consideration, we now believe it can be used as a primary sensor without requiring the camera to confirm visual image recognition.” Tesla wants everyone to know that this bold move made by their organization is geared towards the faster attainment of its goal to achieve full driving autonomy.

Trip Chowdhury, an analyst for Global Equities research, believes Tesla’s decision could actually cause a lot of trouble for its old partner Mobileye. Those who have shares in Mobileye should also start considering their options. Chowdhury claims that the developments introduced by Tesla’s Autopilot 8.0 could change everything we know about autonomous driving today.

Motor companies like Tesla, Ford, General Motors and Mercedes-Benz have been using the front-faced cameras of Mobileye to determine the speed and control of self-driving vehicles. But, Tesla’s Autopilot system will be replacing the camera with radar systems. This means that the company will gain more ground in the race for fully autonomous vehicles. In the past, Mobileye stated that their fully driver-free technology will be released around 2020.

This innovation made by Tesla will drive its competitors to veer away from the camera-based systems and use radar waves instead. Mobileye’s technology could soon become obsolete. Chowdhury made a bold prediction that investors in Mobileye will experience the inevitable drop of their MBLY holdings in the next six to eight months.

Aside from the new radar processing technology, Tesla also brought the Fleet Learning system. This self-learning tool aims to increase the safety of drivers as it observes and stores information about the roads the car passes. It takes note of the curves, slopes, and the structures that make the drivers step on the brakes.

Chowdhury’s analysis seems to have produced its first effect. After declining nearly 12% in the last 4 weeks, and 9% in the past three months, Tesla shares closed Monday’s trading higher by 1.66% to about $198. As for Mobileye, the name dropped more than 4% to $45.56, bringing its total decline over the the past 5 trading sessions to 6.37%.

Tesla shares have been suffering since the start of the year. Last Friday, the stock’s year-to-date drop was at nearly 19%. Hopefully, for Tesla, the announcement of its Autopilot 8.0 and its roll-out will help boost the sales of the company and consequently its stock.

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