As first reported by The Wall Street Journal Tuesday, Mobileye N.V. (NYSE:MBLYF), a supplier of semiautonomous car technology ended its supply agreement with Tesla Motors Inc. (NASDAQ:TSLAD), following a widely covered traffic fatality in May that involved a Tesla vehicle.
Several hours later, the story flipped and suddenly it was Tesla ending the contract, according to Comma.ai CEO George Hotz, as reported by Recode.
“Their (Mobileye’s) stated mission is to lower the safety rating of cars that don’t have their technology,” Hotz told Recode. “So when you have a company like that versus a company like Tesla who actually wants to build incredible cars, there’s absolutely no reason Tesla needs Mobileye.”
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In announcing the breakup from its side, Mobileye said it would no longer provide computer chips and algorithms to Tesla due to disagreements about how the technology was deployed.
From Mobileye’s perspective its technology was never designed to detect vehicles cutting in front of cars equipped with its system. The friction between Mobileye and Tesla seemed to be mostly about the role played by carmakers and their suppliers.
Mobileye Chief Technical Officer Amnon Shashua during an earnings call with analysts Tuesday said, “I think in a partnership, we need to be there on all aspects of how the technology is being used, and not simply providing technology and not being in control of how it is being used.”
The Show Must Go On
In an email, Tesla CEO Elon Musk said the breakup would not affect Tesla’s development of more-advanced versions of the Autopilot system.
In what seemed to be an “excuse” nod to its now former supplier, Musk said, “Mobileye’s ability to evolve its technology is unfortunately negatively affected by having to support hundreds of models from legacy auto companies, resulting in a very high engineering drag coefficient.
Do It Yourself
Industry speculation is, given Musk’s remarks that parting ways with Mobileye would not slow down development of the Autopilot system, Tesla is likely working on its semi-autonomous system chips.
The company recently hired former Advanced Micro Devices chip engineer Jim Keller as vice president of Autopilot. As for Tesla creating its own autonomous technology, Hotz indicated it would be an easy task.
“To be honest,” Hotz said, “the Mobileye system is so easy to reproduce; you don’t need the best talent. I did it in a couple of months. Our software can already do more than Mobileye’s.”
Wall Street Reaction
At the end of trading, Tuesday, Mobileye shares were down more than 8% to $45.33 on volume of 26.2 million shares. This after posting stronger-than-expected Q2 earnings and reporting a bunch of new contracts with other carmakers.
Tesla ended the day at $229.51, down only 0.22% or $0.50 per share. Volume traded was 3.4 million shares. This was despite Musk announcing that his Master Plan – Part Deux could run "tens of billions" of dollars over time and would likely require a "modest capital raise."