Innoviz, Luminar, and Ouster stand out as potential lidar shakeout winners

For lidar startup investors, that’s been a long time coming.

After years of talk — and a SPAC boom in the sensor sector — automakers are finally starting to integrate lidar units into their cars. Many more lidar-equipped models are expected over the next few years.

Lidar, short for Light Detection and Ranging, is a sensor technology that uses invisible lasers to create a detailed 3D map of the surroundings around a sensor. Lidar sensors are critical components of almost all self-driving vehicle systems currently under development. They are also finding increasing applications with advanced driver assistance systems as well as many other areas of robotics.

Capitalizing on investor keen interest in self-driving technology, several lidar startups have gone public through mergers with special purpose acquisition companies, or SPACs, over the past few years. Their valuations have fallen precipitously since then, but a few—namely Innoviz, Luminar, and Ouster—can finally be poised for significant growth, and soon, as automakers rush to adopt more advanced hands-free driving systems.

While the big money is still a few years away, a few of those startups are already breaking away from the pack with growing order books, rapidly evolving technology, and revenues — right now, or soon — in the tens of millions of dollars.

Israel-based Innoviz, which went public via a SPAC merger in late 2020, will soon see its unit on the road: a hands-free highway driving package in BMW’s new 7 Series, which is set to launch in Germany by the end of year and elsewhere in 2024, it will include the Innoviz lidar sensor located in the large sedan’s front grille.

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

Innoviz CEO Omer Keilaf believes that the new BMW will be followed by a wave of cars equipped with lidar sensors.

Kilaff said during Innoviz’s earnings call earlier this month.

“We believe that a significant portion of the market share in the industry will be determined within the next 12 to 18 months,” he said.

Innoviz, of course, won’t claim all that market share. Some will go to existing global auto suppliers, who may or may not turn to tech startups. In China, the market is already being led by local lidar maker Hesai, which generated $123.2 million in revenue in the first half of 2023.

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

Aside from her work with BMW, Innoviz has a major contract with Volkswagen and is in deep conversations with several other global automakers.

Analysts surveyed by Refinitiv expected Innoviz to report just $6 million in revenue in 2023, but see it grow to $17.1 million in 2024 once its shipments to BMW reach full speed.

That’s more than the company’s post-SPAC group is expected to generate, but it’s well behind expectations for the group’s emerging leaders, Luminar and Ouster.

Luminar, headquartered in Orlando, Florida, is perhaps the group’s best-known name among American investors. It has the largest market capitalization as well, at around $2.2 billion.

Luminar is focused entirely on automotive lidar, designing its own silicon chips and offering related software as well.

Led by CEO Austin Russell, Luminar has struck deals to supply lidar and software for Volvo Cars, electric car maker Polestar, Mercedes-Benz and Israeli automotive optical sensor giant Mobileye, among others. The deals cover more than 20 new cars coming from major automakers in total.

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

“The target market penetration by the end of the decade is only 3% to 4%,” Russell said. “Because we believe that even with that, we’ll be able to generate about $5 billion in revenue and $2.5 billion in EBITDA with up to $60 billion of forward-looking order book at that point.” .”

Russell sees Luminar working to grow its forward-looking order book, which stood at $3.4 billion at the end of 2022, by at least another $1 billion in 2023. But most of that revenue is years away, and the company still has a long way to go before it starts to grow. Earnings reporting.

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 enough cash to stick around 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, to reach $268.4 million in 2024, according to Refinitiv.

Oster is arguably Luminar’s closest competitor, but it has a somewhat different focus — and a much smaller market cap, at around $250 million.

While waiting for the auto industry to adopt lidar on a large scale, CEO Angus Bakala has sought opportunities beyond cars. Oster lidar units can be found in automated mining trucks and forklifts, in drones used for mapping, and even in cities, helping to improve pedestrian safety.

But Bakala agrees that the auto lidar market is about to grow exponentially. He said earlier this month that Auster is about to begin shipping samples of a new, low-cost lidar sensor called DF to automakers. A more advanced version — which includes a new custom chip — is due to follow next year.

Wall Street doesn’t expect Ouster’s revenue to grow as exponentially as Luminar’s, but it still has the potential to see significant growth — from $82 million in 2023 to $136.3 million in 2024, per Refinitiv.

Unlike Luminar and Innoviz, Ouster has yet to announce major orders from the automaker. But Bakala believes DF can bring in a lot of new business.

“You don’t need to be first as long as you’re building the thing that’s going to be sustainable in the long run, and that’s an integrated solid-state digital technology,” he said. “So the DF shines because it’s low-cost, it’s solid-state, it’s digital. There’s nothing like it in the world other than this one, and we’re putting it in the hands of automakers this quarter.”