Tesla Motors says it will continue to use Mobileye’s driver-assistance technology in its cars. The declaration aims to end industry speculation about the software company and its subsequent stock price slide over rumors Tesla intended to ditch it for a product developed by hacker George Hotz.
Hotz, the first person to hack an iPhone, challenged Mobileye’s technology in a profile by Bloomberg Businessweek. The focus of the article was Hotz and the self-driving car he built in his garage. But it was his comments about Mobileye, Tesla Motors (TSLA), and CEO Elon Musk that garnered the market’s attention.
Short sellers, particularly Citron Research founder Andrew Left who issued a bearish report on Mobileye in September, jumped on the report. Left tweeted that the company is “the short of the year.” Mobileye’s shares fell Wednesday 7.24% to close at $39.84.
Now, Tesla is pushing back—and not just to defend Mobileye. Tesla spokesman Ricardo Reyes told Fortune late Wednesday evening the article did not correctly represent Tesla or Mobileye. He then debunked some of Hotz claims, and rebutted some of the hackers challenges about autonomous cars. A Mobileye spokesperson declined to comment.
Mobileye has largely dominated its small, yet burgeoning, corner of the automotive industry. Its technology—vision chips and software that interprets data from a camera to anticipate possible collisions with cars, people, animals, and other objects. It is used by nearly two dozen automakers, including Audi, BMW, General Motors (GM), Ford (F), and Tesla Motors. The Israel-based company, which went public in August 2014, now has a market cap of more than $8.6 billion.
Hotz called Mobileye’s technology “absurd” and plans to surpass it with off-the-shelf electronics. These comments could be viewed as simple posturing. What gave it meat was his claim that Musk had proposed giving him a lucrative contract if his technology outshined Mobileye. A series of emails were cited in which Musk tells Hotz he should come work at Tesla and offered a multi-million bonus that would be paid out after the company discontinued its relationship with Mobileye.
Tesla disputes his claims. “We think it is essentially impossible for any small company lacking extensive engineering validation capability to be able to produce an autonomous driving system that can be deployed to production vehicles,” Reyes said in an emailed statement. “It may work as a limited demo on a known stretch of road—Tesla had such a system two years ago—but then requires enormous resources to debug over millions of miles of widely differing roads.
This is the true problem of autonomy: Getting a machine learning system to be 99% correct is relatively easy, but getting it to be 99.9999% correct, which is where it ultimately needs to be, is vastly more difficult. One can see this with the annual machine vision competitions, where the computer will properly identify something as a dog more than 99% of the time, but might occasionally say it is a potted plant.
Mobileye’s technology is an important component of Tesla’s autopilot system that was released in October. But it’s not the only piece. The autopilot feature uses radar, ultrasonics, GPS navigation and cameras. And the autopilot service is constantly learning, thanks to machine learning algorithms, detailed mapping and sensor data, and the car’s wireless connection. Tesla leverages this information from the entire fleet of its autopilot-enabled cars. Meaning, it operates as a network so when one car learns something, they all learn it.
This system was designed and developed in-house, Reyes says in response to a reference in the article that Tesla has simply re-marketed Mobileye’s technology. “Were this simply a matter of repackaging a single vendor’s technology, we would not be unique in offering this groundbreaking experience in production vehicles,” he says in the statement.
Update: Mobileye’s stock price opened up sharply this morning at nearly $42, but has since drifted back down to nearly $40, still up almost 1% for the day.
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To learn more about Tesla’s autopilot technology watch this Fortune video:
[fortune-brightcove videoid=4518261257001]
