In this photo illustration a Innoviz Technologies logo is displayed on a smartphone.
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Israeli lidar maker Innoviz announced Tuesday it has won a contract to supply lidar units and related software for autonomous driving to a unit of Volkswagen, in a deal worth $4 billion in sales over eight years.
Under the deal, Volkswagen will incorporate Innoviz’s latest automotive lidar unit and its proprietary perception software into vehicles across its portfolio.
The deal will run for eight years starting “mid-decade,” when the first Innoviz-equipped Volkswagen Group vehicles are expected to ship. Innoviz expects to supply lidar units for between 5 million and 8 million Volkswagen Group vehicles over that eight-year term.
Lidar — meaning, light detection and ranging — uses an invisible laser beam to scan surroundings and construct a detailed three-dimensional image. The sensors are considered critical components of most autonomous-driving systems, which compare the images generated by lidar with a detailed three-dimensional map to double-check the vehicle’s precise location.
As the costs of development and production have fallen, the sensors have seen broader adoption across vehicles and driver-assist systems – leading to fierce competition between a slew of lidar startups for automaker business.
Innoviz, which went public via a merger with a special purpose acquisition company in late 2020, had previously announced the deal but had not revealed its client. The lidar maker said in May that it had won a deal with “one of the largest vehicle manufacturers in the world” to “become its direct lidar supplier across multiple brands.”
Innoviz’s CEO, Omer Keilaf, said the company’s deal with Cariad, Volkswagen’s software company, was struck after more than two years of testing and due diligence.
“I think one of the most challenging parts was the fact that we are coming with a new product, a new generation [of lidar units], and we had to build confidence on their side to see that it’s up and running. That was part of what we did in the last year,” Keilaf told CNBC. “The second part was getting Volkswagen to feel comfortable with Innoviz becoming a direct supplier.”
The process involved in becoming a direct supplier to a major automaker is an arduous one. Generally, an automaker will put a potential new supplier’s product through extensive quality and durability tests. It will also do due diligence on the potential supplier’s business, accepting the supplier only after it’s confident that the company will be around and financially stable for the length of the contract.
Selling directly to an automaker like Volkswagen is new ground for Innoviz. The company has an existing deal with BMW, but that agreement has established auto supplier Magna International manufacturing and delivering Innoviz’s lidar units to the automaker as something of a go-between.
For Volkswagen, the lidar units will be made by contract manufacturers using tooling provided by – and working directly with – Innoviz, which will then supply the completed units to Volkswagen itself.
Keilaf said that streamlined relationship offers advantages to both Innoviz and Volkswagen.
“Eventually, it was a good fit, because the new product is really intriguing in terms of performance and price,” Keilaf said. “And the fact that we are a direct supplier also is very helpful in terms of bringing the cost down. It’s less of a three-way kind of program.”
(With inputs from CNBC)