Innoviz wins $4 billion Volkswagen lidar contract

Israeli lidar maker Innoviz said on Tuesday it has won a contract to supply lidar units and associated software for autonomous driving to a Volkswagen unit, in a deal worth $4 billion in sales. over eight years.

As part of the agreement, Volkswagen will integrate Innoviz’s latest automotive lidar unit and its proprietary perception software into vehicles in its portfolio.

The agreement will run for eight years from “mid-decade”, when the first Volkswagen Group vehicles equipped with Innoviz are expected to ship. Innoviz expects to provide lidar units for between 5 and 8 million Volkswagen Group vehicles over this eight-year period.

Lidar – aka light detection and ranging – uses an invisible laser beam to scan the environment and build a detailed three-dimensional image. The sensors are considered essential components of most autonomous driving systems, which compare the images generated by the lidar with a detailed three-dimensional map to double-check the precise location of the vehicle.

As development and production costs have plummeted, sensors have been more widely adopted in vehicles and driver assistance systems, leading to fierce competition among a slew of lidar startups for automakers.

Innoviz, which went public via a merger with a special purpose acquisition company in late 2020, previously announced the deal but did not disclose its client. The lidar maker said in May that it had won a deal with “one of the largest automakers in the world” to “become its direct supplier of lidar across multiple brands.”

Innoviz CEO Omer Keilaf said the company’s deal with Cariad, Volkswagen’s software company, was reached after more than two years of testing and due diligence.

“I think one of the most challenging aspects has been the fact that we’re coming in with a new product, a new generation [of lidar units], and we had to build trust on their side to see that it was up and running. That was part of what we did last year,” Keilaf told CNBC. “The second part was making Volkswagen feel comfortable with Innoviz becoming a direct supplier.”

The process required to become a direct supplier to a major automaker is arduous. Typically, an automaker will subject a potential new supplier’s product to extensive testing for quality and durability. It will also perform due diligence on the activities of the potential supplier, accepting the supplier only after ensuring that the business will be there and financially stable for the duration of the contract.

Selling directly to a car manufacturer like Volkswagen is new ground for Innoviz. The company has an existing agreement with BMW, but that agreement established automotive supplier Magna International manufacturing and delivering Innoviz’s lidar units to the automaker as a sort of middleman.

For Volkswagen, the lidar units will be made by contract manufacturers using tools provided by – and working directly with – Innoviz, who will then supply the completed units to Volkswagen itself.

Keilaf said the streamlined relationship provides benefits for both Innoviz and Volkswagen.

“Ultimately, 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’re a direct supplier is also very helpful in keeping costs down. It’s less of a three-pronged program.”