Delphi And Mobileye Create 'Win-Win' Partnership

A day after Mobileye NV MBLY and Delphi Automotive PLC DLPH announced their alliance to develop the SAE Level 4/5 automated driving solution, CLSA analysts Emmanuel Rosner and Andrew Fung termed it a "win-win" partnership.

The brokerage maintains a Buy rating on Mobileye shares with a price tag of $58. The lead analyst believes the alliance provided increased confidence in the company's capacity to retain a big market share in an autonomous world. Delphi's position in the alliance and its capacity to make use of the preferred partner looks more interesting.

In a research note to clients, CLSA said, "The solution will combine Mobileye's camera algorithms and REM dynamic mapping technology with Delphi's systems integration expertise and experience with other sensors like radar and LiDAR, and is expected to cost automakers around $5,000 once scaled up. The two companies expect to jointly invest $300 million–$400 million over the next few years and target a production ready date of 2019 with potential launches as early as late-2019."

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Referring to Mobileye's economics, the lead analysts think that the system cost to be lower by $5,000 compared to any alternative solutions. The brokerage attributed it to the company's REM map-based camera sensors since LiDAR-based approach is more expensive.

The brokerage is also not worried about some auto firms like Ford Motor Company F and Tesla Motors Inc TSLA preferring an in-house development of autonomous driving capabilities. CLSA pointed out the management's confidence in attracting several other automakers since it provided capital-efficient autonomous technology.

At time of writing, Mobileye was trading at $48.20, down 2.94 percent on the day. Delphi was up 1.06 percent at $68.59.

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