Innoviz, Luminar, Ouster emerge as likely winners in lidar shakeout

For investors in lidar startups, it’s been a long time coming.

After years of talk — and the SPAC boom in the sensor sector — automakers are finally starting to incorporate lidar devices into their vehicles. And more lidar-equipped models are expected over the next few years.

Lidar is a sensor technology that uses invisible lasers to create a detailed 3D map of the sensor’s surroundings, light detection and ranging. Lidar sensors are considered essential components of almost all autonomous vehicle systems currently under development. They are also finding increasing applications with advanced driver assistance systems and many other areas of robotics.

Playing on strong investor interest in self-driving technology, many lidar startups have gone public in the past few years through mergers with special purpose acquisition companies, or SPACs. Valuations for those companies have since fallen sharply, but a few—i.e Novelty, Luminar and Exit — may finally be poised for a big boost, and soon automakers will be rushing to adopt more advanced silent control systems.

While the big money is still a few years away, some of these startups are setting themselves apart from the pack with growing order books, fast-growing technology and tens of millions of dollars in revenue — now or soon.

Israel-based NoveltyIntroduced to the public with the SPAC merger in late 2020, it will soon see its units on the road. BMW’s new 7 Series, due to go on sale in Germany by the end of the year and elsewhere in 2024, will include an Innoviz lidar sensor embedded in the large sedan’s front grille as part of its quiet highways package.

This sensor, along with software developed by Innoviz for BMW, gives the car’s computer brain a constant view of what’s in front of the car, up to about 250 meters.

Innoviz CEO Omer Keilaf believes that the new BMW series will follow the wave of cars equipped with lidar sensors.

“Technology is important for security, there are very high levels of technological differences, and the player who wins the most business will ultimately have a leadership advantage in scale and cost, which will likely be difficult to match,” Keilaf said during the Innoviz speech. earnings call earlier this month.

“We believe that a large part of the industry market share will be established in the next 12 to 18 months,” he said.

Of course, not all of this market share will be claimed by Innoviz. Some will go to existing global auto suppliers, who may or may not turn to startups for technology. In China, the market is already led by local lidar manufacturer Hesai, which is expected to generate $123.2 million in revenue in the first half of 2023.

But the global addressable market is likely to be large enough to leave significant opportunities for several post-SPAC US startups.

In addition to working with BMW, Innoviz has a major contract with Volkswagen and is in deep talks with several other global automakers.

Analysts polled by Refinitiv expect Innoviz to generate just $6 million in revenue in 2023, but see that rising to $17.1 million in 2024 as deliveries to BMW ramp up.

That’s more than most other lidar companies that have recently gone public through SPACs are expected to earn, but it’s well below forecasts for the group’s two emerging leaders. Luminar and Exit.

Based in Orlando, Florida, Luminar is perhaps the group’s best-known name among US investors. It has the largest market cap at around $2.2 billion.

Luminar focuses entirely on automotive lidar, designing its own silicon chips and offering the corresponding software.

Led by CEO Austin Russell, Luminar has secured contracts to supply lidar and software to EV maker Volvo Cars. Polestar, Mercedes-Benz, and Israeli automotive visual sensing giant Mobileye, among others. The deals cover a total of more than 20 new cars from major automakers.

Luminar, which began shipping lidar units in November, has big ambitions, but as Russell pointed out during its most recent earnings call, it doesn’t need a huge market share to make money.

“By the end of the decade, our target market penetration is only 3% to 4%,” Russell said, “because we think we’ll be able to get about $5 billion in revenue and $2.5 billion in EBITDA with that, and at that point we’re going to a $60 billion future.” looking order book.”

Russell sees Luminar increasing its future order book by at least $1 billion in 2023, from $3.4 billion at the end of 2022. before starting to report earnings.

Luminar CFO Tom Fennimore said earlier this month that investors shouldn’t expect Luminar to break even until the end of 2025.

Wall Street thinks Luminar has the money to last until then, and it likes the look of the lidar maker’s pipeline: Analysts expect Luminar to generate $84.5 million in revenue this year, rising to $268.4 million in 2024, according to Refinitiv .

Ouster is arguably Luminar’s closest competitor, but it has a slightly different focus — and a smaller market cap of about $250 million.

While waiting for the automotive industry to adopt lidar at scale, CEO Angus Pacala looked for opportunities outside of cars. Ouster’s lidar devices can be found in automated mining trucks and forklifts, drones used for mapping, and even in cities to help improve pedestrian safety.

But Pacala agrees that the automotive lidar market is about to grow significantly. Earlier this month, Ouster was about to start shipping samples of a new low-cost solid-state lidar sensor called DF to automakers, he said. A more advanced version incorporating a new custom chip will be introduced next year.

Wall Street doesn’t expect Ouster’s revenue to grow as dramatically as Luminar’s, but it will still see significant growth — from $82 million in 2023 to $136.3 million in 2024, according to Refinitiv.

Unlike Luminar and Innoviz, Ouster has yet to announce major orders from automakers. But Pacala thinks DF could bring a lot of new business.

“You don’t need to be first as long as you’re building solid-state digital technology that’s going to be durable and integrated,” he said. “And so DF shines because it’s cheap, it’s solid-state, it’s digital. There’s nothing like it in the world except for this device, and we’re putting it in the hands of automakers this quarter.”