TRANSPORTATION AND LOGISTICS BRIEFING: Waymo's first to test cars on public roads without driver - Continental acquires auto cybersecurity startup Argus - Ola enlists Microsoft for its connected car platform

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WAYMO TESTS SELF-DRIVING CARS ON PUBLIC ROADS WITHOUT DRIVERS: In a significant step forward for its self-driving car development, Google spinoff Waymo has begun testing its autonomous cars on public roads in Chandler, Arizona without a driver behind the wheel, CEO John Krafcik announced at a conference in Lisbon, TechCrunch reports.

The announcement makes Waymo the first company to test self-driving cars on public roads in the US without a driver behind the wheel. The vehicles are being tested within a 100-square-mile area of Chandler where Waymo has already been testing autonomous vehicles. For now, the cars are being tested with a Waymo employee riding in the backseat as a passenger.

The news means Waymo is getting nearer to its goal of commercializing its self-driving car system. Waymo intends to monetize its self-driving technology by launching a ride-hailing service using cars equipped with its technology. The company has been testing its technology since 2009, longer than any other player in the self-driving space, and recently began testing rides with public volunteers in its Early Rider program in Arizona. However, all of those tests involved a driver sitting behind the wheel to take over the vehicle in case of emergency.

The next steps for Waymo are to expand the driverless tests geographically, open up the tests to Early Rider program participants, and then, finally, pursue a commercial launch. Krafcik said the company wants to broaden the tests beyond Chandler to include the entire Phoenix metro area, and that Waymo will allow members of the Early Rider program to get rides with the driverless test cars "within the next few months." That will make Waymo's service the first to allow consumers to get on-demand rides in a car without a driver, an important milestone in the development of autonomous mobility services. After that, the company will likely begin exploring opening the program up to the broader public through a commercial launch in the Phoenix area. Barring any major obstacles along the way, Waymo seems poised to be the first to commercialize its self-driving technology.

CONTINENTAL ACQUIRES AUTO CYBERSECURITY STARTUP ARGUS: Germany-based Continental AG, one of the world's leading auto parts suppliers, announced last week that it will acquire Israeli automotive cybersecurity startup Argus for an undisclosed amount, Reuters reports. Israeli media put the deal's worth at around $400 million, Reuters said.

Once the acquisition is finalized, Argus' team will be rolled into Continental's Elektrobit subsidiary, and will help develop new cybersecurity solutions for connected cars. Argus previously partnered with Elektrobit to jointly develop a solution, which launched last month, for delivering over-the-air (OTA) software updates to vehicles. Continental predicts that there will be hundreds of millions of connected vehicles on the road by 2020 that hackers could potentially target. In order to provide security for those vehicles, Elektrobit and Argus will develop cybersecurity solutions and services for the cars, including intrusion detection and prevention, and fleet management and monitoring for enterprises. The companies will also provide security OTA updates for vehicles to immediately patch newly discovered vulnerabilities in their software.

Car companies have been embedding internet connectivity into their vehicles for years, but automakers are consistently criticized for not doing enough to ensure those internet connections are secure from hackers:

• A 2015 Senate report blamed automakers for "a clear lack of appropriate security measures to protect drivers from hackers."
• An IDC report from 2016 said auto companies are lagging in addressing vehicle cybersecurity issues, and predicted it would take up to three years for the auto industry to successfully address security vulnerabilities in today's cars.
• Earlier this year, the Alliance for Telecommunications Industry Solutions, which represents many of the telecom companies that provide internet connections to vehicles, said connected cars continue to be at high risk of falling victim to various types of cyberattacks.

Auto companies have started responding to this threat of cyberattacks on their vehicles, and are ramping up their security efforts. That will lead to increased spending on automotive security solutions like those that Elektrobit and Argus plan to develop. The market for such solutions is expected to expand rapidly, from less than $1 million last year to $759 million in 2023, according to IHS Markit.

INDIAN RIDE-HAILING COMPANY PARTNERS WITH MICROSOFT: Indian ride-hailing company Ola has partnered with Microsoft to integrate the tech giant's Azure cloud services tools into Ola Play, the company's connected car platform, Money Control reports. The Play platform, which Ola launched about a year ago, currently allows passengers to stream music and video, and browse the internet through cars' infotainment centers. The ride-hailing company sells the platform to automakers, and many of those firms have agreements in place to lease vehicles to Ola for its ride-hailing business.

The integration will allow Ola Play to perform features such as predictive maintenance, navigation, and vehicle diagnostics through Microsoft's connected car suite. This could involve, for instance, the platform collecting data on a car's battery usage and sending it to the Azure cloud to be analyzed. The platform could then trigger an automated alert to tell the driver when the battery will soon need to be replaced.

The agreement is part of Microsoft's larger foray into the auto industry to help it diversify its cloud revenue sources. Earlier this year, the company agreed to license a series of connected car software patents to Toyota. In addition, Volvo, Nissan, and Ford all use Microsoft Azure's connected car software stack to varying degrees. This agreement is just the latest iteration of this strategy to drive future revenue for the company's Azure cloud segment, which brought in $6.9 billion last quarter, and accounted for about 28% of the company's net revenue.

Meanwhile, Ola likely hopes the agreement will make the Play platform more attractive to automakers, ultimately boosting the company's ride-hailing service. Features like predictive maintenance and on-board diagnostics can save companies millions by preventing a costly trip to the repair shop. This may persuade more automakers to use Ola Play in their cars, and could grow the company's ride-hailing fleet by bolstering its relationship with those automakers. That may well strengthen its position in its ongoing fight with Uber.

IN OTHER NEWS

• Lyft's chief operating officer, Rex Tibbins, plans to leave the company by the end of the 2017, TechCrunch reports. This means the firm now needs to fill a key leadership position as it prepares for an initial public offering (IPO) sometime late next year or in early 2019. Meanwhile, the company will set up its first permanent office in New York City in the coming weeks, which will house sales and marketing teams and a handful of its autonomous vehicle engineers.
• Southeast Asian ride-hailing company Grab recently announced that it has completed 1 billion rides, according to TechCrunch. The company, which was founded in 2012, now covers 142 cities in Thailand, Indonesia, Vietnam, Singapore, Malaysia, the Philippines, and Myanmar. Grab joins Didi Chuxing and Uber, its Chinese and American counterparts, in reaching this milestone.
• The US Department of Transportation (DOT) announced it will partner with five cities to accelerate adoption of drone use within their confines, Supply Chain Dive reports. The DOT, which announced this initiative late last month, will accept applications from cities around the country for 57 days before deciding which five cities it will work with. The program is designed to help foster innovation in the drone space, while helping the DOT learn how to manage drone traffic for new applications of the technology, like drone delivery.