Self-driving cars are a hot topic with passionate supporters and sceptics alike. The subject was thrust back into the spotlight during the summer when the UK government unveiled a £10 million package that could see trials on the streets of three UK cities sometime next year. The question that springs to mind is how such semi and completely autonomous technology might affect Seeing Machines (SEE:AIM), the AIM-listed Australian company behind its own operator fatigue management kit, or Driver Safety Systems (DSS) as the firm calls it.

The idea of self-driving cars is not new. Internet giant Google (GOOG:NDQ) has clocked up more than 140,000 miles across its fleet of computer-controlled prototype vehicles. All of the big global car makers have their own development and testing programmes. There are cars on the road today that can park themselves, automatically emergency brake and even adapt their speed based on how far in front the next car is, a sort of augmented cruise-control.

Yet Seeing Machines chief executive officer (CEO) Ken Kroeger thinks the reality is a little less science fiction looking. He believes that fully autonomous vehicles on roads are at least 40 years away, yet semi-autonomous cars and trucks could be on the streets inside two years. The key issue is legislation. Commercial aircraft have had fully automated flight systems for years, but we still have pilots. Laws are in place that stipulate even if the vehicle is controlling itself, there must still be an operator ready and able to resume control at all times. Seeing Machines’ ‘DSS solution is ideally suited and proven in use,’ says FinnCap analyst Lorne Daniel.

New markets

Kroeger is pursuing a strategy of partnering with global original equipment manufacturers (OEMs) in order to tap into various large markets. Some success has already been earned in the mining sector, thanks to its partner deal with Caterpillar (CAT:NYSE). This is an industry where the often enormous haulage vehicles can cost millions of pounds each and so driver-based crashes and damage is an expensive business. On 1 September the company unveiled an important new agreement, a 15-year strategic alliance with TK Holdings, the Americas subsidiary of Japan’s Takata (7312:T). This is a key supplier of automotive safety equipment and components to major road vehicle OEMs, including airbags, seatbelts, sensors, child seats and steering wheels.

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In Takata’s own full-year 2014 results presentation the group flags innovative safety features heading for mass production; Hands on Wheel (HOW) sensing and, more importantly for Seeing Machines, Takata’s own Driver Monitoring System (DMS) featuring a front-mounted camera aimed at the driver and built on Seeing Machines’ DSS technology.

Then just three weeks later (22 Sep) a collaboration deal was struck with Electro-Motive Diesel, a subsidiary of Progress Rail (owned by Caterpillar) for in-cab train driver monitoring systems. Other key markets that Kroeger is targeting include flight training for pilots (to make sure trainees are monitoring the right things during simulator flights), where it has two trials currently running, possibly the shipping market and even into some consumer electronics.

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These are vast opportunities yet Seeing Machines remains a jam tomorrow story at the moment thanks to hefty cash burn as it pursues its growth ambitions (see chart). ‘Cash flow was weak as the expansion drew in working capital, but that has been funded by a placing in the year, to leave net cash of A$22.8 million at June,’ said FinnCap’s Lorne Daniel following full-year results on 29 August.

The company is gradually opening up target markets according to its growth road map. Far from being threatened by semi and fully autonomous transport developments, Seeing Machines could emerge as a key technology partner to many of the major OEMs. But how much new cash it may take to reach its aims is hard to say, and investors willing to take a long-term interest in this company should accept the likelihood of future cash calls as part of the story.