Toyota’s Exit From Self-Driving Cars a Huge Blow to Industry

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After an Uber self-driving car struck and killed a pedestrian, Toyota Motor Corp. (NYSE: TM) suspended its self-driving car business. The fact that Toyota is one of the world’s three largest car companies is a larger blow than if a small tech company or ride-sharing operation had quit.

The Toyota effort, dubbed Chauffeur, is in the midst of testing in Michigan and California. Toyota’s management released a statement:

We cannot speculate on the cause of the incident or what it may mean to the automated driving industry going forward. Because we feel the incident may have an emotional effect on our test drivers, we have decided to temporarily pause our Chauffeur mode testing on public roads.

So far, no other large auto manufacturer or major tech company like Alphabet, which operates one of the largest self-driving car operations called Waymo, has indicated it will take steps like Toyota’s. If any of these also suspended operations, the decision would be catastrophic.

Toyota has a great deal to lose by its decision. The Japanese company is generally measured as the second largest car maker in the world based on unit sales, just behind Volkswagen and ahead of General Motors. It sold over 10 million cars worldwide last year.

Shortly, Ford and GM, the two major U.S. car companies, will need to decide whether to follow Toyota’s lead. Certainly, there will be a great deal of pressure if an investigation into the Uber incident shows the death was a complete failure of the self-driving system. Unlike many other firms in the midst of self-driving experiments, Ford and GM have millions of customers and cannot afford highly negative perceptions of a safety decision.

Even if no other car company ends, at least temporarily, its self-driving experiments, Toyota’s decision, which is so widely followed, will affect the self-driving car business for months, if not longer.

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