Did Toyota Move Into Self-Driving Cars Too Late?

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Toyota Motor Corp. (NYSE: TM) has become the latest car company to dive into the self-driving car business. It joins every large car company in the world and dozens of tech companies pressing toward a future in which car and light truck passengers can do anything other than drive. And Toyota is months, if not years behind the industry curve.

The company disclosed:

Toyota will establish a new company in Tokyo in the latter part of this month named “Toyota Research Institute-Advanced Development” (TRI-AD) that will accelerate its efforts in advanced development for automated driving.

To enable the new efforts at TRI-AD, Toyota Motor Corporation (TMC), Aisin Seiki Co., Ltd. (Aisin), and Denso Corporation (Denso) have concluded a memorandum of understanding on joint development of fully-integrated, production-quality software for automated driving. Going forward, the three companies will hold further discussions, aiming to conclude a concrete joint development contract.

Together, TMC, Aisin and Denso plan to invest more than 300 billion yen in TRI-AD. The new company is targeting a staff of approximately 1,000 employees, including external recruitment and staff from TMC, TRI, and Toyota Group Companies Aisin and Denso. Toyota is in the process of selecting a location in Tokyo that is competitive in terms of accessibility and recruitment.

The investment translates into $2.8 billion.

The self-driving car industry faces two hurdles. The first is that no one knows how large the market is. Even early entries into the business, such as Alphabet Inc.’s (NASDAQ: GOOGL) Waymo, have just gotten cars without a driver to assist their self-driving features onto the road. While the companies strive to perfect their technology to the point where it is commercial, many people say they do not want the vehicles. Often, this is because they think the cars are unsafe, an irony since safety is considered a strong part of the new technology.

The other challenge to the self-driving car industry is that the hundreds of billions of dollars that have been or will be invested may create an industry so crowded that it will be hard for anyone beyond the leaders to make money. In that way, it is like the smartphone industry in which the leaders reap profits and the followers try to make money as they attempt to catch up.

Toyota’s expenditure is late, and it also may be futile.