TOKYO — It sounds audacious for a little-known autonomous driving startup to brand itself as Japan’s answer to Google’s self-driving unit Waymo, but consider this: Founder and CEO Shinpei Kato says his small company, Tier IV Inc., is actually much more than that. Tier IV, he insists, is Japan’s version of Waymo, Tesla and Mobileye all rolled into one.
Tier IV takes a three-pronged approach to autonomous mobility. It positions itself as the maker of the software, like Waymo; a seller of self-driving vehicles, like Tesla; and a supplier of both hardware and software to other players in the industry, like Israeli technology company Mobileye.
“The value proposition of Tier IV is that Tier IV is doing what Waymo, Tesla and Mobileye are doing at the same time,” Kato said in a March 22 interview at the company’s Tokyo office.
Kato floats that grandiose vision despite that fact that Tier IV was founded only in 2015, has 330 employees and booked just ¥2 billion ($13 million) in revenue last year.
Indeed, Kato, a 42-year-old computer scientist fluent in English, has big plans.
He expects Tier IV’s revenue to double every year through the end of the decade and eclipse $1 billion by 2030. His goal is to break even around 2026, then prepare to take the company public. Eventually, Kato envisions selling tens of thousands of robotaxis and autonomous buses a year.
“It’s possible because we are based on open source,” Kato said. “We can do what the other three major companies are doing at the same time because our core competence is open source.”
In Tier IV’s case, the open-source secret sauce is Kato’s innovative Autoware software. Released in 2015, Autoware is billed as the world’s first open-source system for self-driving cars.
An impressive roster of Japanese shareholders is already buying into the neophyte mobility player’s game plan. The investors include technology stalwart Sony, motorcycle maker Yamaha, truckmaker Isuzu, tire heavyweight Bridgestone and Japanese telecommunications giant KDDI.
Tier IV’s top shareholder is Sompo Holdings, one of Japan’s biggest insurance companies.
Tier IV is a rare startup darling in a country better known for stolid conglomerates such as the Mitsubishi Group than for nimble risk-taking entrepreneurs. Startups here often have more difficulty generating international buzz and funding than their counterparts in Silicon Valley.
Japan’s insular business culture and language barriers are part of the problem. But big companies here also tend to look overseas when investing seed money, rather than supporting up-and-comers in their own backyards. Toyota, for example, opted to back American air mobility company Joby Aviation rather than SkyDrive, a Japanese competitor based right in Toyota City.
Autonomous driving in particular is an endeavor that experts say is increasingly complex and fraught with more challenges than initially thought. Just this month, the world’s largest organization of computing professionals issued a technical brief concluding that automated vehicles may never reach their promise of delivering a world of dramatically reduced traffic injuries and deaths.
But Japan is upping its mobility startup game, especially in the Nagoya area near the manufacturing heartland of the Toyota Group. In October, a massive startup support center will open in Nagoya with enough office space to support 1,000 seedling companies. Backed by the local government, it will be the largest startup center in Japan.
“What we are trying to do is nurture a culture of open innovation, which is something difficult for Japanese companies,” said Noritaka Yamashita, general manager of Innovator’s Garage, a startup hub in Nagoya. “The established companies in this area are too strong to encourage startups. Their attitude is, ‘Why do we need startups? We already have strong companies.’ ”
Tier IV’s Autoware underpins its Pilot.Auto in-vehicle software platform. On the hardware side, it offers digital cameras and a range of autonomous vehicles such as minibuses, robotaxis and delivery robots.
“My strategy is step by step,” Kato said. “We showcase first that we can do the same as what Waymo’s doing. This leads to more customers who want what we’re doing. So they want to buy cars from us. So now we can start scaling a Tesla scheme.”
The final step, which Kato compares with Mobileye, is selling the underlying technology, like a parts supplier, to carmakers wanting to make their own vehicles based on Tier IV’s systems.
“It’s straightforward,” Kato said. “Shift from service to vehicle, and from vehicle to components.”
The open-source software gives it a leg up, Kato said. Open source means anyone is free to use and modify Autoware, as is done with such popular open-source products as the Linux operating system or Python programming language.
The open-source approach contrasts with the proprietary strategy pursued by many automakers that strive to develop autonomous driving systems in-house. Toyota, for example, is building its own autonomous driving software based on an in-house operating system.
But open-source software could be a big help to a small company. Because Autoware is freely distributed, the wider market’s tinkering acts a multiplier on Tier IV’s own engineering resources. Autoware is used by more than 500 companies in more that 20 countries and in 30-plus vehicles, Tier IV says.
Among its users is the Mobility in Harmony Consortium, an open electric vehicle platform led by Taiwan’s Foxconn, or Hon Hai Technology Group, which is best known for making Apple iPhones. MIH aims to create kits of EV hardware and software for automakers to use.
Yamaha Motor also uses Tier IV technology in factory automation.
“The core technology is never dominated by a single company,” Kato said. “You don’t want to be locked into a single company. This lowers the threshold for new customers to jump in.”
Tier IV is headquartered in Nagoya, but its main offices and development center are in Tokyo. Kato also has an information technology teaching position at the University of Tokyo.
The company takes its name from the idea of being a Tier 4, or “deep tech,” supplier to the auto industry. Additionally, the letters “IV” can be read to stand for intelligent vehicle.
Some may also interpret the name as referencing Level 4 autonomous driving.
The company began its first Level 4 public road tests in Japan in 2017 and began trialing a robotaxi service in Tokyo’s bustling Shinjuku area in 2020. Throughout Japan, it runs Level 4 field testing in 50 municipalities, including low-speed shuttle bus services.
Tier IV sources some of its all-electric vehicles from Chinese manufacturers as white-label models to be resold by Tier IV. The company envisions eventually ramping up sales to tens of thousands of units by leaning on contract manufacturers.
Tier IV has a long road ahead before achieving international recognition, let alone scale at that level. A future priority will be appealing to overseas investors, Kato said.
But at home, his company is marching ahead. In March, truckmaker Isuzu Motors agreed to invest $40 million in Tier IV to develop autonomous driving systems for buses.
“We can expand our business to be not only vehicle manufacturing but also providing components that are adopted by other vehicles,” Kato said. “Then we can be more scalable.”