Autonomous driving is the ‘trillion-dollar opportunity’ Luminar is chasing, CEO says

Luminar Founder & CEO Austin Russell joins Yahoo Finance Live to discuss the company's partnership with Mercedes-Benz, the state of the autonomous vehicle market, the future of self-driving technology, and the outlook for chip makers and production.

Video Transcript

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- Luminar said on Thursday Mercedes-Benz will use its laser sensors in a next generation auto platform to enable certain semi-autonomous driving features. The luxury automaker is also taking an unspecified minority stake in Luminar, shares finish Thursday session up 12%. With us now is Luminar's founder and CEO Austin Russell. Austin good to see you as always. I imagine it's a pretty big week for you. So for the tech newbies out there that are still trying to wrap their hands around autonomous, how will these sensors be used in Mercedes cars?

AUSTIN RUSSELL: Yep, so the whole point of what we're doing with Mercedes and the objective is to be able to enable the integration of this kind of LIDAR technology on the vehicles to see and understand the world around them accurately and precisely in 3D, to give the cars a better understanding and be able to have even better and safer assisted and autonomous driving features is the objective. So that's what we really been working deeply with them on to be able to enable that kind of capability. But there's a lot that goes into it. And part of the significance of this, though, is that the intent is actually for consumer vehicles as opposed to say, you know, the robotaxi test vehicles and other types of things that are out there as it stands today. So, you know, this is really a critical moment in the industry where you can start to see that transition from R&D actually going into series production. And with Mercedes here at the table, it's-- you know, couldn't think of a better brand that stand for safety, luxury, and everything else that goes into it, kind of, at the pinnacle of the automotive industry. So it's awesome to be kicking this off full steam ahead.

- Yeah, Austin, it's Julie here. We've been following your journey, obviously, pretty closely along different steps of the way here. And so what's-- when are people going to be able to potentially have access to a Mercedes with this technology? And what kinds of things are you having to do to adapt it differently than some of your previously signed partnerships?

AUSTIN RUSSELL: Yep, so a couple of things on that front. One, they aren't disclosing this-- any, kind of, specific timelines or planned vehicles for it and in large part because they actually haven't even announced the specific vehicles themselves, you know, or what it may be there. So when it comes down to it, the goal of this is to get this integrated in the next gen platform that they have. So that's ultimately something that can support different kinds of vehicle models and architectures and everything for the production platform. So that's what's going on at this point in time. But, you know, you can expect it as part of the objective in the not too distant future when it comes down to that.

In terms of the fundamental technology that's going into this, it's the same core Luminar LIDAR technology and Iris technology that we've had. Obviously, there's a lot of deep integration work. And, you know, we're not stopping, we're continuing to improve the performance and capabilities of the device and that absolutely applies to Mercedes as well. But part of the underlying principle here is that this is the same core technology that we're enabling across the board with our partners from Volvo, to SAIC, to, well, actually even Daimler trucks in addition to Mercedes, and, of course, the tech partners like Mobileye and Nvidia as well along the way. So it's-- there's a lot of leverage.

- Austin, you've signed a lot of deals. I think we've talked to you pretty much whenever you have announced a new deal. When do you start producing your products?

AUSTIN RUSSELL: Yep, so everything is leading up to big start of production for series production at the end of this year. I mean, we've obviously been producing these products-- for sake of clarity, gone through a number of iterations of products. But these are largely for uses in development use cases at this stage. But Iris is really the first time where you're actually seeing this go out into series production and having these capabilities out on real roads in consumer vehicles. So this is a first really for us and for the industry in many ways. And, as a result that, Iris technology is basically-- our start of production for that is targeted at the end of the year.

So we're moving full steam ahead to that and then can really start to see the ramp up over the subsequent years there to ultimately see this as a vision of mainstream adopted technology as standardized throughout the industry by the end of the decade. I would be surprised if most major automakers didn't have this adopted on board their consumer vehicles by that time, considering just the dramatic safety benefits and not to mention the autonomous capabilities that you have to have. But those are key drivers for making this a reality.

- Do you think investors are-- they still misunderstand what you're doing, Austin? Are you more of auto safety play than this notion that over the next five years every car on the road will-- won't require hands on the wheels?

AUSTIN RUSSELL: Yeah, I would actually say-- and, one, is, yes, I think there's no question that we're not fully or properly understood and certainly by equity markets at least. That's part of why we did a massive buyback recently as well to be able to raise capital to do that, just doubling down on ourselves. You know, we think that there's a huge opportunity and, frankly, hugely undervalued at this point, you know, compared to where we are and everything that we're winning and the pure opportunity that we're delivering. I mean, if you do this right, you know, that's the trillion opportunity and we've been on a massive win streak that we don't expect to ultimately stop anytime soon when it comes down to it. So, yeah, there's a lot of head.

But, you know, I'd say, in terms of what type of company, we are, yeah, there's no question it's involving safety, it's involving this, but I'd say we're a new type, a new breed of automotive technology company that's really taking the industry by storm. And when it comes to autonomous capabilities, we are an autonomous company in many ways but not in the same way that people traditionally think about it like a Waymo, Cruise, Argo-- these robotaxi companies-- you know, that are valued well into the tens of billions in these cases, but doing a totally different thing of trying to be able to replace the driver altogether, you know, take it out of the seat and how you-- have a robotaxi pick you up and drop you off, you know, in an urban area and environment. Our goal is get on-- leverage the existing multi-trillion a year production passenger vehicle industry, get this into the hands of consumers, get these next generation safety capabilities and autonomous capabilities out into the real world as quickly as possible and have it happen really this decade, not next decade, when it comes down to it. And that's just tremendous leverage and how you can build an incredibly valuable business.

- And to your point, Austin, there's a lot of players in this, even if they're playing in different aspects of it, right? What are you-- and I know this is sort of a long-term question-- but what do you see as your market share here? Like, do you see there being a dominant player and its Luminar or do you see some sort of high double digit market share participants here by the time we get to the end of the decade?

AUSTIN RUSSELL: Yeah, I think-- well, I think the data goes to show and the decisions in the industry go to show that and from both the technical business and financial standpoint that all signs point to Luminar when it comes down to that. But that said, the reality is that-- I think-- well, of course, think we'll have a dominant or the dominant market share position in more than everyone else combined just as, you know, I mean, from like, for example, a series production standpoint and getting designed into these vehicles and everything. That's already, you know, more than everyone else combined at this stage for this type of application capability.

But when it comes down to it, I think the significance is less about like market share and like what the slice of the pie is so to say but rather how big you can actually make the pie in the first place. And that's-- it's a completely different game because you take a look at it, you know, and look at some of the fin-- like the economics behind it, it only takes about, you know, I think into a prior model with like 3% or 4% market penetration to be able to build a, in our case, like, $5 billion revenue, $2 and 1/2 billion EBITDA business with a $60 billion forward looking order book and massive growth there. So, you know, you take a look at it and it's like, wow, OK, it really only takes a very small level of market penetration to be able to do that. So that's what it's all about is it's about market adoption, market penetration more than a give or take from anyone.

That said, oh, we've certainly been leading the race and-- by a long shot when it comes to market penetration and adoption for series production. And that gives you just incredibly sustaining advantage as you reach economies of scale and drive forward this product into the industry to make all this happen. So a lot ahead, but this is the ultimate goal of how you 10x, 100x the business.

- Austin, as a founder of the company, what was behind your decision to sign off on giving Mercedes a stake in Luminar?

AUSTIN RUSSELL: Yep, so this is really part of the broader holistic deal with Mercedes as they're-- which has an equity component, which shares are being provided, you know, in context and consideration of certain services and data that's being provided to us as part of this.

But when it comes down to it, I would say that in connection with that there's also a data component where they're able to provide from series production vehicle subject to consumer consent and applicable law that back from the cars, which ends up enabling us to continuously improve the product quality, safety, autonomous capabilities, and all that goes into it. But more than anything it's about aligning interest and getting great people involved as part of our business from both a technical standpoint, business standpoint, and financial standpoint.

So great stuff all around and continuing to move full speed ahead. I'd say the real thing, though, and obviously the real opportunity here that's the, you know, game changer is seeing this technology through onto the consumer vehicles. And that's something that's, you know, orders of magnitude more meaningful in terms of opportunity than, say, any stake or any other aspect of this. So that's what we're fully focused on from an execution standpoint.

- Always fun getting some time with you. Luminar founder and CEO Austin Russell. We'll talk to you soon.