April 19, 2019

Israel’s Automotive Tech Industry Is Poised for the Future

How did a country with no native automakers and scant car culture build an automotive tech scene that rivals Silicon Valley’s?

Israel has no native automotive industry. Aside from Autocars—a mid-20th-century experiment in fiberglass-bodied rattletraps that produced the Holy Land’s answer to the Trabant—passenger cars have never been built there in any significant numbers. And new imported cars carry a 92 percent tariff. There is no endemic vehicular culture, other than possibly tour buses. “By and large, Israelis don’t really care about cars,” says Jeff Jablansky, an expert on the local automotive market and a onetime contributor to Israel’s limited automotive press.

Yet the small country is the birthplace of both Waze and Mobileye, two of the biggest success stories in contemporary automotive tech. Waze provides real-time crowdsourced mapping and traffic data to app subscribers. It sold to Google for more than $1 billion in 2013. Mobileye is lesser known but no less impressive. A supplier to automakers and the after­market, it provides sensor hardware and software that supports driver-assistance functions. It sold to Intel for $15 billion in 2017.

As in company towns such as Detroit or Hollywood, success here has catalyzed competition. In the past two decades, a plethora of other automotive tech companies have sprung up in Israel. They work on a diverse range of systems including vehicular cybersecurity (Argus Cyber Security, Karamba Security, Regulus Cyber), in-car artificial intelligence (Cognata, Cortica), so-called vehicle-to-vehicle (V2V) and vehicle-to-everything (V2X) communication (Autotalks, Guardian Optical Technologies, Nexar), and advanced driver-protection systems (Arbe Robotics, Innoviz Technologies, SaverOne). The saturation is such that the area around Tel Aviv, where many of these startups are headquartered, is now referred to as Silicon Wadi (wadi being the Arabic word for “valley”). In 2017, investment in the sector had more than tripled compared with 2015 funding, with venture capital outlays estimated to surpass $1 billion for 2018.

One could point to the horrendous Israeli traffic, the worst in the Western world according to the Organisation for Economic Co-Operation and Development, as a means to explain why this country—almost as densely populated as India and hosting an underdeveloped public-transportation network—would be searching for automotive innovations. But this escalation of automotive tech is not an accident brought on by gridlock. Rather, it is the confluence of decades of governmental, educational, and business-development practices born, in part, out of necessity. “Israel is, to be fair, scarce of natural resources,” says Erez Dagan, a 16-year veteran of Mobileye and the company’s current executive vice president for products and strategy. “So the country found a very rewarding practice focusing on high-end technology.”

This tech focus really got rolling during the internet and cellphone boom of the late 20th century, with pervasive cellular networks and mass adoption of connectivity. But local affection for technological solutions dates back to the contentious geopolitical situation surrounding the country’s founding. Israel’s many and populous neighbors were not exactly fond of the United Nations’ decision, following World War II and the Holocaust, to recognize an émigré Jewish homeland in their midst, especially since the land for this new country was also inhabited by Palestinians who laid claim to it (and still do). With massive support from the United States and other allies, Israel attempted to transform its numerical and territorial disadvantage via advanced military technology.

Specific, tech-focused units within the Israeli Defense Forces (IDF) became the locus for much of this development, particularly the advancement of intelligence encryption and decryption software. The educational system worked to foster these military endeavors with special programs that identified students with strong talents in STEM (science, technology, engineering, and math), creating a pipeline from schools into key IDF units.

“Military service is compulsory in Israel [for non-Arabs], and the military gets the first look at the smartest and brightest,” says Noam Bardin, who has been the CEO of Waze for 10 years. “In 12th grade in America, people are trying to get into colleges. But in Israel, you’re trying to get into the right IDF unit. So the Israeli military has been the education hotbed for tech in Israel in general. They have a very big investment in the space.”

Jablansky echoes this sentiment. “A lot of the best and most successful startups have come from a bunch of guys sitting in a tank who had an idea,” he says. “Then they finished the army and they started working on it.”

The military’s quick pace of software development and implementation, the short and intense duration of mandatory service (24 months for women, 32 for men), and the requisite close quarters have a tendency to break down traditional hierarchies, allowing a quick flow of information and approvals up the chain of command. Because the country is so small, business happens at a smaller scale. All of this has fostered a resultant nimbleness. “A 10,000-person company in America is not uncommon,” says Bardin. “Except for maybe the military, I don’t think we have a 10,000-person company in Israel.” (Waze has only 500 employees.) Because of this, and because of the pressures of startup venture-capital-funding rounds, Israeli tech-industry leaders feel a lot of pressure to find streamlined solutions, think innovatively, and move fast.

(Published @ ‘Car and Driver’, article by Brett Berk, April 11, 2019)