Alphabet Continues to Invest in Waymo
July 28, 2024
This Week in The Autonomy Economy is presented by Koop Insurance, a specialist insurance provider focused on robotics and autonomous vehicles.
This Week in The Autonomy Economy, The Road to Autonomy Index declined 4.13%, Alphabet announced an additional $5 billion investment into Waymo, GM made the strategic decision to indefinitely delay the Cruise Origin and Tesla reaffirmed their long-term commitment to autonomy.
The additional investment by Alphabet into Waymo and Sundar Pichai’s comments on Alphabet’s Q2 2024 earnings call signaled to the market Alphabet is all-in on Waymo. While Alphabet is all-on on Waymo, they do have a vehicle problem that has to be resolved in order for Waymo to truly scale.
One of the advantages Cruise has is their relationship with GM. The vehicles GM is going to manufacture for Cruise will be built in America. They will not be subject to tariffs and consumer worries about being made in China.
It is becoming very evident that having an OEM partner is crucial for scaling an autonomous vehicle company. The OEM partnership enables the autonomous vehicle company to control its own destiny. This is why Tesla is going to play such a large role in the future of autonomy — they manufacture their own vehicles.
We see a future where the conversation shifts from Cruise and Waymo to Cruise and Tesla. In our opinion, GM is going to introduce a personally owned autonomous vehicle powered by Cruise at some point in the future. This would put GM/Cruise in direct competition with Tesla.
Leaving Waymo as a pure-play robotaxi provider, unless Waymo strikes a non-Chinese OEM partnership to develop a personally owned autonomous vehicle.
Personally owned autonomous vehicles are the future and they are going to be a giant source of revenue for both GM and Tesla. It’s only a matter of time.
Cruise parent GM, Tesla and Waymo parent Alphabet are The Road to Autonomy Index component companies
Subscribe to This Week in The Autonomy Economy™
A weekly newsletter featuring insight and commentary on the autonomy economy™ and how the financial markets are viewing its emergence.
What’s Moving the Markets
Alphabet Continues to Invest in Waymo
Over the years Alphabet has been criticized for spending too much on Waymo, despite all of the technological breakthroughs. However, when you compare Alphabet’s spending on Meta’s Reality Labs and Apple’s development of the VisionPro, Alphabet’s spending on Waymo pales in comparison.
Over the last four years, Meta has spent over $45 billion developing the metaverse, while Apple reportedly spent over $20 billion developing the Vision Pro. Alphabet on the other hand, has spent an estimated $30 billion developing Waymo, including outside funding.
The total Other Bets loss since 2013 is ~-$40B. Let’s assume that majority of that is Waymo. I’d think Waymo investments are $20 – $25B (that includes the two external rounds so far). Plus they are doing $5B more.
– Shweta Khajuria Managing Director, Global Internet, Wolfe Research
When compared to Meta’s spending on Reality Labs and Apple’s on the Vision Pro, Waymo rather looks like a bargain. The Apple Pro was met with a lot of hype that turned into a lot of returns.
Apple has yet to sell 100,000 units in a quarter since its launch in the US in February, and it faces a 75% drop in domestic sales in the current quarter, according to market tracker IDC. The hype and excitement around the VisonPro has all but evaporated.
Back to the drawing board for Apple. While Apple heads back to the drawing board, Meta and Alphabet continue to invest. This quarter, Alphabet committed an additional $5 billion for the ongoing operations of Waymo.
The additional increase in investment is warranted as Waymo is now becoming a business. To date, Waymo has completed more than 2 million trips and driven more than 20 million fully autonomous miles on public roads.
In San Francisco and Phoenix, Waymo is completing more than 50,000 weekly paid rides. With an average fare of $15 per ride, Waymo would be generating $750,000 a week. Over the course of 12 months, Waymo’s annual revenue from operations in San Francisco and Phoenix would be $39,107,160 per year.
If 25,000 rides per week occurred both in San Francisco and Phoenix at an average rate of $15 per ride, Waymo would be generating on average $1,629,465 per city, per month, for a yearly average revenue per city of $19,553,580.
While the Greater Phoenix Metropolitan region is where Waymo first began fully-autonomous operations, we do not view the region as a growth market. We view it as a long-term test market that will provide positive cash flow in due time.
Waymo’s current growth markets that have been publicly announced are San Francisco and Los Angeles. Between September 2019 to August 2020, 247,745,228.5 TNC rides on average occurred in California.
64% of those rides took place in Los Angeles, San Francisco, and San Diego counties. In California, Los Angeles is the largest TNC market accounting for over 114.9 million trips followed by San Francisco with 38.52 million trips.
If Waymo is able to successfully capture 10% of the Los Angeles TNC market, (9.575 million rides annually — 2020 data), LA becomes a $143,625,000 yearly revenue opportunity for the company.
Factoring in San Francisco at a 10% market share, Los Angeles and San Francisco combined become a $149,403,000 yearly revenue opportunity for Waymo.
Waymo is on the road to generating billions of dollars in annual revenue as the company captures TNC market share in Los Angeles, San Francisco, Austin and potentially Nashville and Miami.
Sometimes you just have to invest and create new markets. Whether it’s autonomous vehicles or smart glasses that someone actually wants to use.
Our take: Alphabet made Waymo a business and soon Waymo will contribute positively to Alphabet’s earnings.
Waymo is currently ranked #1 with a bullish outlook on AUTONOMY LEADERBOARD in the autonomous vehicle category.
Waymo parent Alphabet is a The Road to Autonomy Index component company
GM Indefinitely Delays Cruise Origin
Being a leader is about making hard decisions. The decision does not have to be necessarily right, but it has to be a decision. Ms. Mary Barra and the board of GM have made a lot of decisions during her tenure and they made a very prudent one when they indefinitely delayed the Cruise Origin.
Indefinitely delaying the Cruise Origin was the right decision, even despite one of the co-founders of Cruise making false assumptions about the decision. Since the Origin was first unveiled in January 2020, the world has changed. Consumer habits, wants and needs have changed.
Consumers no longer want to face one another in a shared autonomous vehicle, they want private rides. A reality that will eventually lead to personally owned autonomous vehicles. GM understands this and they are extremely well posited to capitalize on the changing market.
When you talk about what is the right balance between expansion, capital demands, and partners and/or investors, we’re very open, and we’re seeing significant interest in Cruise.
So as we move into this next phase, we’re going to be looking at what’s the right efficient way to go forward with Cruise from a robo-taxi business from a Cruise perspective. But also we are seeing very laser-focused on the personal autonomous vehicle opportunity for GM. So we think we’re well-positioned.
– Mary Barra, Chair and CEO, GM, GM Q2 2024 Earnings Call (July 23, 2024)
The decision to shift away from the Origin to the next-generation Chevrolet Bolt, while staying focused on personally owned autonomous vehicles is strategic. From a vehicle platform perspective, the decision removes regulatory uncertainty, uncertainty if consumers would actually want to share a ride and cost uncertainty.
From a business standpoint, GM is leaning into the future and embracing an autonomous future that will become a very profitable business.
Bottom line is, GM is running Cruise as a business. They are taking into account the changing realities of the market, while staying focused on the prize — full autonomy.
Our take: GM is running Cruise as a business and setting Cruise up for a very successful and profitable future.
Cruise is currently ranked #2 with a positive outlook on AUTONOMY LEADERBOARD in the autonomous vehicle category.
Cruise parent GM is a The Road to Autonomy Index component company
Tesla’s Next Growth Wave: Autonomy
On July 23rd, Tesla reported earnings of 52 cents adjusted vs 62 cents expected and $25.50 billion in revenue vs. $24.77 billion expected. Tesla missed on earnings, but beat on revenue. Revenue was reported as a 2% increase in annual revenue for the second quarter.
On the back of the results, the stock tumbled 8% in after-hours. While Tesla did not meet Wall Street exceptions, there were some bright spots. In the quarter, Tesla deployed 9.4 GWh of energy storage products, their highest quarterly deployment to date.
On the autonomy front, Tesla gave an outlook that reaffirmed their commitment to autonomy.
Our company is currently between two major growth waves: the first one began with the global expansion of the Model 3/Y platform and we believe the next one will be initiated by advances in autonomy and introduction of new products, including those built on our next generation vehicle platform.
In 2024, our vehicle volume growth rate may be notably lower than the growth rate achieved in 2023, as our teams work on the launch of the next generation vehicle and other products. In 2024, the growth rates of energy storage deployments and revenue in our Energy Generation and Storage business should outpace the Automotive business.
– Tesla Q2 2024 Investor Update
Autonomy is the next growth wave for Tesla. If autonomy can have a similar impact to the Model 3/Y, Tesla is in for a bright future. A future that is autonomous. On the earnings call, CEO Elon Musk stated the following about autonomy:
The big — really, by far, the biggest differentiator for Tesla is autonomy.
But as I said this before in earning calls, it — the value of Tesla overwhelmingly is autonomy
We will have a fleet that’s on the order of 7 million vehicle autonomy soon. In the U.S.
– Elon Musk, Chief Executive Officer and Product Architect, Tesla
Mr. Musk clearly has big plans for Tesla and autonomy. We will learn more about these plans on October 10th, when Tesla introduces the CyberCab. It’s only a matter of time, until Tesla completely transforms another industry.
The full earnings transcript is available here, if you are interested in reading Mr. Musk’s full comments.
Our take: It’s not a matter of if, it’s a matter of when. At some point, Tesla will “crack” FSD and usher in the era of personally owned autonomous vehicles.
Tesla is currently ranked #1 with a bullish outlook on AUTONOMY LEADERBOARD in the personally owned autonomous vehicle category.
Tesla is a The Road to Autonomy Index component company
Hauling Autonomously in the Permian Basin
On July 23rd, Kodiak announced a partnership with Atlas Energy Solutions, where Kodiak will outfit new Atlas high-capacity trucks with Kodiak’s autonomous driving technology.
Kodiak has successfully operated fully autonomous on a 21-mile route in Permian Basin. Full autonomy will enable Atlas to operate trucks 24/7 without having to worry about the growing labor shortage.7654q
For Kodiak, the deal signals strength as the company moves towards fully autonomous operations. Don Burnette, Founder & CEO joined us for an episode of Autonomy Insights where he spoke about the economics of Kodiak and why the partnership with Atlas fits into their business model.
The episode will be released on YouTube at 10am EST on Monday. Subscribe to The Road to Autonomy YouTube channel to be notified when the video is live.
Our take: Kodiak is building a diversified business.
Kodiak is currently ranked #1 with a bullish outlook on AUTONOMY LEADERBOARD in both the autonomous trucks and defense – autonomous ground vehicles categories.
Piquing Our Interest
Slower Growth for Mobileye Bank of America has assigned a $22 price target for Mobileye ($MLBY) based on 5.5x EV/Sales on 2025E. BofA is projecting a slower growth outlook, specifically following the company’s initial guidance for 2024.
Growing Demand for Data Center Energy Goldman Sachs Research is estimating data center power demand will grow 160% by 2030.
As Hybrid Vehicles Growth Accelerates, Investors are Betting on Platinum Holdings of ETFs backed by physical platinum surged by roughly 444,000 ounces in the second quarter of 2024, equating to almost 6% of annual demand.
Applied Intuition Closes $300 Million Secondary Round Applied Intuition has successfully raised a secondary investment round of over $300 million with Fidelity Management & Research Company joining as a new investor.
Making the Right Investments Bank of America has maintained their Buy rating on GM ($GM) and their $85 price target, as the company’s ongoing execution and strength in its Core business continues to enable the company to make investments in EVs, AVs, and other areas to future-proof the business, while continuing to return value to shareholders.
Social Buzz
Nuro Expands Autonomous Vehicle Testing in California
Nuro has expanded autonomous vehicle testing to Mountain New, Palo Alto, Los Altos and Menlo Park. While we do not hear much from Nuro these days, they continue to test their autonomy stack. This fall we will be taking a ride in the Nuro autonomous vehicle and we are looking forward to seeing how the vehicle performs in mixed traffic.
Our take: We believe at some point in the future Nuro will licensing their stack and pivot away from being overly dependent on their delivery bot.
Waymo is Now Testing the Zeekr Autonomous Vehicle on Public Roads
With the discontinuation of the Jaguar I-Pace come December, Waymo needs a new vehicle platform, but we question why the Zeekr. Is it cost? Waymo in our opinion is making a strategic blunder given the current geo-political environment.
Blunder aside, Waymo has begun testing (manually) the Waymo Zeekr autonomous vehicle in San Francisco. You can view a photo the test vehicle here.
Our take: As we wrote about last week, Waymo’s Zeekr strategy is risky. 81% of U.S. adults currently view China unfavorably according to a Pew Research Center survey. Not to mention potential tariffs and a soon to be released Chinese software in autonomous vehicles proposed rule from the Biden Commerce Department. Would you ride in a Chinese manufactured autonomous vehicle?
Waymo is currently ranked #1 with a bullish outlook on AUTONOMY LEADERBOARD in the autonomous vehicle category.
Waymo parent Alphabet is a The Road to Autonomy Index component company
Cruise is on The Road To Becoming a Business Again
Cruise is back on the road to becoming a business again. According to Bloomberg, the company is targeting fully autonomous operations by the end of the year. With a return to charging for rides in 2025.
Once Cruise turns on the revenue spigot, Cruise becomes a business once again. This time is different, the company has the right management team in place to build a robotaxi business while in tandem working with GM to develop personally owned autonomous vehicles.
Our take: One could say this time is different and not really mean it, but we mean it. We feel that Cruise is in a much better place today, than it was 24 months ago. It’s a new company with a great parent who understands economics, manufacturing and how to scale safe and reliable products.
Cruise is currently ranked #2 with a positive outlook on AUTONOMY LEADERBOARD in the autonomous vehicle category.
Cruise parent GM is a The Road to Autonomy Index component company
The Road to Autonomy Index® / Weekly Performance
The Road to Autonomy Index® is a high-definition lens into the emerging world of autonomous vehicles. It is the world’s first and only pure-play index designed to measure the performance of the autonomous vehicle/truck market.
For the week of July 22nd, The Road to Autonomy Index declined 4.13%, the S&P 500 declined 0.83% and the NASDAQ 100 declined 2.56%. The Road to Autonomy Index underperformed the S&P 500 by 3.3% and underperformed the NASDAQ 100 by 1.57%.
Year to Date (YTD), The Road to Autonomy Index has returned 11.79%
Follow The Road to Autonomy Index on Apple Stocks | Google Finance
The Road to Autonomy Index Component Companies
For more information on The Road to Autonomy Index and to learn about licensing and marketing opportunities, please email hello (at) roadtoautonomy.com
Latest Insight & The Road to Autonomy Podcast
Coalescing Around The Leaders details why the autonomy market is consolidating around the leaders and he shares thoughts on the emergence of the Big Four in autonomous trucking: Aurora, Kodiak, Daimler Truck and Volvo.
Wednesday, July 24, 2024
Ossa Fisher, President of Aurora joined The Road to Autonomy podcast to discuss how Aurora is preparing for driver-out operations in Texas by the end of the year. Aurora is taking a disciplined approach that Ossa likens to the preparation of elite athletes training for the Olympics.
Listen on The Road to Autonomy | Apple Podcasts | Spotify | YouTube Music
Tuesday, July 23, 2024
Subscribe to This Week in The Autonomy Economy™
A weekly newsletter featuring insight and commentary on the autonomy economy™ and how the financial markets are viewing its emergence.
All price references and market forecasts are as of the date that this newsletter has been sent. The Road to Autonomy is not providing any financial, economic, legal, accounting, or tax advice or recommendations in this newsletter. The information contained in this newsletter does not constitute investment advice and should not be relied upon to evaluate any potential transaction.
Inclusion of a security within The Road to Autonomy Index® is not a recommendation by The Road to Autonomy Indices LLC to buy, sell, or hold such security, nor is it considered to be investment advice.
