Yahoo News Israel's Automotive Tech Industry Is Poised for the Future
Israel has no native automotive industry. Aside from Autocars—a mid-20th-century experiment in fiberglass-bodied rattletraps that produced the Holy Land's answer to the Trabant—passenger cars have never been built there in any significant numbers. And new imported cars carry a 92 percent tariff. There is no endemic vehicular culture, other than possibly tour buses. "By and large, Israelis don't really care about cars," says Jeff Jablansky, an expert on the local automotive market and a onetime contributor to Israel's limited automotive press.
Yet the small country is the birthplace of both Waze and Mobileye, two of the biggest success stories in contemporary automotive tech. Waze provides real-time crowdsourced mapping and traffic data to app subscribers. It sold to Google for more than $1 billion in 2013. Mobileye is lesser known but no less impressive. A supplier to automakers and the aftermarket, it provides sensor hardware and software that supports driver-assistance functions. It sold to Intel for $15 billion in 2017.
As in company towns such as Detroit or Hollywood, success here has catalyzed competition. In the past two decades, a plethora of other automotive tech companies have sprung up in Israel. They work on a diverse range of systems including vehicular cybersecurity (Argus Cyber Security, Karamba Security, Regulus Cyber), in-car artificial intelligence (Cognata, Cortica), so-called vehicle-to-vehicle (V2V) and vehicle-to-everything (V2X) communication (Autotalks, Guardian Optical Technologies, Nexar), and advanced driver-protection systems (Arbe Robotics, Innoviz Technologies, SaverOne). The saturation is such that the area around Tel Aviv, where many of these startups are headquartered, is now referred to as Silicon Wadi (wadi being the Arabic word for "valley"). In 2017, investment in the sector had more than tripled compared with 2015 funding, with venture capital outlays estimated to surpass $1 billion for 2018.
One could point to the horrendous Israeli traffic, the worst in the Western world according to the Organisation for Economic Co-Operation and Development, as a means to explain why this country—almost as densely populated as India and hosting an underdeveloped public-transportation network—would be searching for automotive innovations. But this escalation of automotive tech is not an accident brought on by gridlock. Rather, it is the confluence of decades of governmental, educational, and business-development practices born, in part, out of necessity. "Israel is, to be fair, scarce of natural resources," says Erez Dagan, a 16-year veteran of Mobileye and the company's current executive vice president for products and strategy. "So the country found a very rewarding practice focusing on high-end technology."
This tech focus really got rolling during the internet and cellphone boom of the late 20th century, with pervasive cellular networks and mass adoption of connectivity. But local affection for technological solutions dates back to the contentious geopolitical situation surrounding the country's founding. Israel's many and populous neighbors were not exactly fond of the United Nations' decision, following World War II and the Holocaust, to recognize an émigré Jewish homeland in their midst, especially since the land for this new country was also inhabited by Palestinians who laid claim to it (and still do). With massive support from the United States and other allies, Israel attempted to transform its numerical and territorial disadvantage via advanced military technology.
Specific, tech-focused units within the Israeli Defense Forces (IDF) became the locus for much of this development, particularly the advancement of intelligence encryption and decryption software. The educational system worked to foster these military endeavors with special programs that identified students with strong talents in STEM (science, technology, engineering, and math), creating a pipeline from schools into key IDF units.
"Military service is compulsory in Israel [for non-Arabs], and the military gets the first look at the smartest and brightest," says Noam Bardin, who has been the CEO of Waze for 10 years. "In 12th grade in America, people are trying to get into colleges. But in Israel, you're trying to get into the right IDF unit. So the Israeli military has been the education hotbed for tech in Israel in general. They have a very big investment in the space."
Jablansky echoes this sentiment. "A lot of the best and most successful startups have come from a bunch of guys sitting in a tank who had an idea," he says. "Then they finished the army and they started working on it."
The military's quick pace of software development and implementation, the short and intense duration of mandatory service (24 months for women, 32 for men), and the requisite close quarters have a tendency to break down traditional hierarchies, allowing a quick flow of information and approvals up the chain of command. Because the country is so small, business happens at a smaller scale. All of this has fostered a resultant nimbleness. "A 10,000-person company in America is not uncommon," says Bardin. "Except for maybe the military, I don't think we have a 10,000-person company in Israel." (Waze has only 500 employees.) Because of this, and because of the pressures of startup venture-capital-funding rounds, Israeli tech-industry leaders feel a lot of pressure to find streamlined solutions, think innovatively, and move fast.
The industry's adaptability means that many automakers, especially those with geographic proximity in Europe, have begun to rely on Silicon Wadi as a sort of outsourced laboratory for advanced in-car technological systems and software. "The automotive companies in general were taken by surprise by the startup leaders in tech," says Bardin. "Israel has become kind of a next-time-zone, very innovative, internationally known center for filling that gap." (Israel is just one hour ahead of Germany and France.) In 2017, Porsche announced an eight-figure investment in Israeli mobility ventures, with a member of the Stuttgart carmaker's executive board for finance and information technology (IT), Lutz Meschke, calling Israel "a key market for IT experts and engineers." A year later, the Volkswagen Group opened a research and development center in Israel, much like General Motors did in 2008. And a few months ago, Hyundai launched its innovation hub there as well. Ruby Chen, the head of Hyundai's new venture, cites Israel's "number of unique underlying characteristics" in the company's decision to establish this Tel Aviv office.
Israel is even trying to brand itself as a center of excellence in automotive tech. "The government supports this big time," says Bruno Fernandez-Ruiz, co-founder and CTO of connected-dash-camera software company Nexar. "You hear [prime minister Benjamin] Netanyahu talk. He talks about security and automotive as the two big themes that are currently going on in Israel."
Since 2011, the Israeli government has supported the Fuel Choices and Smart Mobility Initiative aimed, according to its official materials, at turning "Israel into a center of knowledge and industry in the field of alternative fuel technologies and smart mobility by supporting an array of tools to further the life cycle of a product from basic research all the way to commercialization." The office has been implementing this strategy through a variety of means: establishing multidisciplinary academic research centers, rallying entrepreneurial community support, providing research grants, investing in companies and startups, and generally creating what it calls a " 'one-stop shop' for stakeholders in the field" with a stated emphasis on significant field experiments and demonstrations that will "reduce new technology's time to market." In 2017, the country's legislature adopted a $70 million resolution to "encourage Israel's industry, entrepreneurship, and research in the field of smart mobility and to position Israel as a global leader in the field."
Despite all this automotive-adjacent activity, experts agree that this boom has little to do with automobiles. "This is not a car play," says Jablansky. "Anything that goes into this is not a car play. This is about data." The goal of these Israeli companies is not to toil at being a hardware supplier and then work up to manufacturing a full vehicle, as has been the apparent aim of companies such as Pininfarina and Williams recently. Neither is it a spinoff quest of larger companies such as Apple, Google, or LeEco working on automated-vehicle technology in the broader sense. The goal of many Israeli companies is to create a supply chain for the implementation of data and data processing in the broadest yet most secure way: connected dash cameras, anti-hacking devices, and integration with insurance companies.
"Vehicles are going to be the first commercially deployed robots out there, the first consumers of actual intelligence making money out of real-time artificial intelligence," says Mobileye's Dagan. "That's kind of the forefront of the data sciences. So I believe it's only natural that the industry that consumes the forefront of AI is where we're going to become a key player."
As the idea of vehicle automation amplifies, it seems logical that an ambitious company would try to create a solution that combines and addresses in-car AI, V2X communications, and cybersecurity, the key areas in which the Israeli automotive tech sector is most focused. But that doesn't seem to be happening. This is, in part, because of the Israeli tendency to focus on small and discrete innovations, and to scale modestly. But it is also because many in the Wadi do not see fully automated Level 5 cars as being imminently available to consumers, not even in the next decade.
In their view, true profitability lies in incremental innovations, rather than the development of some holistic dream invention that solves all technological issues related to automation at once. "I agree that computers are better at dealing with this information than humans," Fernandez-Ruiz says. "But we think out of the ethos of the company we created. If you want to address the 1.3 million road casualties today, that is an opportunity to help human beings right now. Not in 10 years." Sometimes it's the humbler ambitions that have the greatest potential.
From the April 2019 issue
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