Seeing Machines has won the contract to supply US carmaker Fiat Chrysler (FCA) with its Fovio chip Driver Monitoring System, as predicted here months ago.
Ostensibly it is a US$6m contract (for Jeep or Ram, I believe) but as we all know the value is likely to end up far higher as DMS is swiftly rolled out across all its various car marques and models.
My estimate for the eventual worth of this deal is nearer to the hundreds of millions of US dollars. FCA produces 4m cars a year. Within 3 years I expect the Fovio chip to be in approximately 50% of them, say 2m cars. At US$20 a pop (volume discount from US$30) that is at least $40m a year. EVERY YEAR from 2022!
As the lifetime of a model is 5 years, my belief is that this strategic contract should end up being worth at least US$200m.
Clearly FCA couldnāt afford to let Ford with its F-150 pick-up outcompete in the premium DMS arena. They just had to have it.
I feel a twinge of sympathy for Smart Eye who at one stage hoped to win FCA. Indeed, as i believe the Tier 1 is Aptiv Seeing Machines are rubbing salt intoĀ its wounds — it is the equivalent of your partner running off with your worst enemy.
Unfortunately, Smart EyeĀ donāt have an automotive grade chip, although they are trying to develop one. Unfortunately for them, Seeing Machines has already passed the finishing line where the US premium auto OEMs are concerned. After all it has now bagged FCA, Ford and GM.
In additionĀ theĀ next raceĀ has nearly been won in Europe where it will win VW to add to BMW and Mercedes and I donāt expect the result to be any different in Japan (Toyota and Honda are coming I believe).
This latest win brings an eventual bid for Seeing Machines much, much closer. So far as DMS is concerned SEE really is the next Mobileye. Indeed, I imagine the calculations Iāve roughed out will be replicated by many chip companies.
The writer holds stock in Seeing Machines.
Chris
Another great article. Amazing the difference in quoted revenue. Do you believe the A$6 million relates purely to engineering milestone payments and that FCA is following the Cadillac route and offering Fovio as an optional extra hence the low revenue figure?
It would seem a bit shortsighted if so!
Thanks
Hi Roy,
I don’t pay much heed to the figures that come with the RNS as they seem far too conservative and will, I believe, bear little relation to actual revenues. It will go into a top selling model first, I assume — a Jeep or Ram rival to Ford’s F-150, I suspect. What really matters is that it will quickly get rolled out as standard fitment across more models and eventually most FCA cars. AEB used to be an option in cars but because it is so effective in reducing the number of accidents it has become standard in most new cars. Camera-based DMS will follow the same path but more quickly. SEE is the gold standard for this, Smart Eye merely an also ran. Commercial imperative, even more than legislation, is now driving (excuse the pun!) the introduction of camera-based DMS.
Chris.
Who do you think the next big catch for SEE will be? Toyota or VW? Do you think if one follows the other will follow suit as well? If that is the case, then everyone should be moving to SEE or at least going through the RFQ process. SEE already have 5 of the big 9. Whether the automotive world like it or not SEE already has a monopoly on the DMS market due to the Fovio chip. Unless the OEM is willing to sacrifice safety, reliability and performance for cost then they will go for Smarteye.
Thanks
Hi Mike,
I think VW comes before Toyota. Still, SEE will win both, I’m sure. SEE is the next Mobileye and an increasing number of people are realising it — I doff my imaginary cap to Lorne Daniel at FinnCap for being the first to do so.
Hi Chris
I seem to recall that in a previous blog you said it was possible that SEE could potentially gain a 90% DMS market share. As it seems likely that legislation will be passed by the European Parliament as regards driver monitoring and Semicast’s recent tweets acknowledging the difference between safety and convenience DMS and the legislation relates to safety, do you believe it is now even more likely your prediction will be met given the lack of any other credible choices? ie SEYE is a convenience DMS and Nvidia’s well known power consumption issues and what happens in Europe is likely to happen in most other places?
Thanks
Hi Roy,
I think the figure I mentioned was 75% here: https://www.safestocks.co.uk/2018/05/16/seeing-machines-set-to-win-75-of-global-dms-market/
I got taken to task by some for that prediction but it does look plausible given the critical difference in the safety performance of its DMS compared to competitors. However, I do believe Seeing Machines will get snapped up before that becomes a reality. One or two more big wins (VW/Audi + Toyota) on top of the EU regulatory boost and Seeing Machines will be completely de-risked.
CEO Ken claims the undustry needs 2-4 suppliers. We here believe SM is #1, SmartEye clearly an alternative, but far behind on nearly all aspects. Will more emerge? SM Guardian should hit the 2 billion km mark this week (woo hoo). Will anyone ever catch up?
I hope the company provides a meaningful update (upgrade) as it’s 2020 outlook shortly… last year around this time the company was expecting revenues could exceed $80 million (essentially a doubling in 2019 after a doubling in 2018 vs 2017), and then the European news gave the stock a second incremental boost higher. Fast forward, Fleet turned into a temporary black hole. Hopefully just postponing the second doubling (and a few more doublings right)!
Seems to me like the potential pipeline is substantially larger today than it was a year ago? Again, I just hope the company paints this picture clearly (while still being respectful of clients’ secrecy plus “conservative” so no more disappointments).
My prediction is that the stock gets back to at least last year’s peak of 12 pence this year as the European recommendation becomes mandatory and more models show up on showroom floors!
Longer term, this company deserves to be valued at least as highly as some of these private (less useful to the world) unicorns!?
They should only consider selling above that level!? Chris, please keep us posted on the analysts’ updated research if possible. I really like your Ā£2 prediction. Wouldn’t that be amazing!
The potential pipeline is huge (official figures in the RNS are far too conservative), especially given the legislative drivers and contracts SEE is set to win imminently.
I think once Cenkos puts out 2021/22 figures this will shoot up. Cenkos will surely do that before the end of summer.
In any case there are several more huge auto OEM wins that I expect to be announced over the next 3/4 months.
When I emailed ken to ask about market share he said they are aiming for 25-30% share only and if I expect them to get more I might as well sell up. So not sure if the 75% mark will become true.
Ken has to underpromise and overdeliver. I’m sure Fovio’s eventual share of the auto market will be much nearer to 75% than 25%-30%.
https://www.daimler.com/innovation/case/autonomous/drive-pilot-2.html
Do you think this is related to your prediction this #6 is FCA?
Hi Chris,
Does another fundraise concern you at all? I imagine there would be a need to deliver on all the programs currently won as well as to build capacity for those that may be won in the near term?
Be grateful for your thoughts!
Best,
MJ
I would like to see any raise made at a healthy premium to the current share price, ideally to a strategic investor. SEE’s dominance of the DMS market warrants that. I’d also expect to see the full board dip into their pockets and buy some stock.
With all the auto contracts Seeing Machines is winning (and set to win), the reasons for any raise are overall positive. Still, fleet was supposed to be cash generative by now. I’ve not seen any detailed outline of what is happening re. fleet and now would be the time to do that.
Chris
There may well be a fund raise but Guardian (Fleet and Caterpillar) seem to be doing better. Together with engineering milestone payments, the need for additional funds may be small and not requiring of a placement.
Thanks.
Chris,
Have you ever known a company to be so unreliable when it comes to uncertainty amongst its private investors?
It’s like pulling teeth being a stock holder in Seeing machines.
It does beggar belief. Not only is it annoying PIs but I assume that many institutional investors have been put off investing by the regular issuance of shares. That said, thank god for the technology. Thankfully, it is taking the auto OEM market by storm.
Is it really taking the market by storm? We’ve had 2 small wins in 12 months.
Then today’s absolutely disgusting RNS. No premium but a huge discount to the current price.
I’m shocked and disheartened by the whole process.
Shame on the management for doing this AGAIN to its PIs.
The FCA win was a huge win (beating SmartEye) but the value was been downplayed. We’re going to win a lot more OEMs.
Of course, Auto isn’t the problem it is the way the company has managed this and other fundraises. It annoyed some important fund managers and was not done cleverly. If I was a fund manager I’d be pushing for changes. In addition, the raise price was clearly leaked given the price moves yesterday.
Well said, Steven. This last issuance borders on stealing. Management selling half the company at 1/10th of fair value. Deplorable.