Apple Increases Autonomous Vehicle Testing
February 11, 2024
This Week in The Autonomy Economy, The Road to Autonomy Index returned 2.15%, the California DMV reported Apple autonomous vehicles with a safety driver drove 450,000 miles on public roads in 2023. A 262% year-over-year increase in miles driven. All signs point to Apple ramping up their autonomous vehicle efforts.
Overall fully autonomous vehicles with no safety driver traveled 3,267,792 miles in 2023 on California public roads.
Uber reported Q4 2023 earnings on February 7th. Monthly Active Platform Consumers (MAPCs) grew 15% year-over-year with gross bookings growing 22% year-over-year to $37.6 billion. As Uber reports an increase in gross bookings, auto loan delinquencies are rising in tandem. 7.7% of auto loans transitioned into delinquency in Q4 2023.
Could the rise in auto loan delinquencies lead to an uptick in Uber rides? It’s possible. When Uber reports Q1 2024 earnings on May 1, 2024, we will be looking for signs of increased rides. After earnings, we will model the data to see how it correlates to the health of the consumer (credit card debt and auto loan delinquency rates) and share our findings in a future newsletter.
The financial health of the consumer is changing and the impact on mobility could be positive as the times they are a-changin‘.
Apple and Uber are The Road to Autonomy Index component companies
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What’s Moving the Markets
Apple Increases Autonomous Vehicle Testing
Apple appears to be ramping up their autonomous vehicle testing program on public roads. In 2023, 67 Apple autonomous vehicles drove over 450,000 miles on public roads in California with a safety driver, an increase of 262% year-over-year.
On average each Apple autonomous vehicle drove 6,716 miles in 2023. In August of that year, those vehicles drove an average of 1,252 miles for a total of 83,900 miles in the month.
While these numbers may seem low compared to Waymo, which logged 4.8 million miles (with and without a safety driver) and Cruise with 2.6 million miles (with and without a safety driver) in 2023. They are relativity comparable to Amazon owned Zoox, which logged more than 700,000 miles (with and without a safety driver).
Apple saw the largest increase in reported autonomous vehicle testing miles in California behind Cruise which increased 207%, Waymo 68% and Zoox 31%.
Could Apple be the sleeper in the autonomous vehicle industry that upends Amazon’s plans for Zoox? Could Apple’s uptick in testing point to an increased internal focus on the Apple Car aka Project Titan?
Despite what has been reported in the media, we can confirm that Project Titian is very much indeed a focus inside of Apple. Apple is quietly doing the right things to lay the foundation for the introduction of the Apple Car.
While the testing miles reported on California public roads is low compared to the industry leader, Waymo, it is important to point out that Apple owns the old DaimlerChrysler proving ground in Wittmann, Arizona.
Apple has been testing autonomous vehicles at their private 5,500-acre facility for years. The proving grounds are located at 33°47’48.4″N 112°29’51.3″W. In 2021, Apple acquired the property for $125 million through a holding company called Route 14 Investment Partners LLC.
Staying on the theme of comparing numbers, Apple’s facility is over 48 times larger then Waymo’s 113-acre “Castle” facility located in Atwater, CA.
There is plenty of land for Apple to privately test autonomous vehicles with and without safety drivers at their own proving grounds. These miles never get reported. Most importantly, do not forget. The Apple Car is not about the car, it’s about the experience.
Our take: The Apple Car will become a reality one day. When it does, it will be fully integrated into the Apple ecosystem further increasing the amount of time users spend on Apple products per day. That number today is 5 hours a day. With the new Vision Pro and soon the Apple Car, that number will only increase.
Apple, Waymo parent Alphabet, Cruise parent GM and Zoox parent Amazon are The Road to Autonomy Index component companies
Are Autonomous Vehicles Good for Uber?
In a February 4th RBC Capital Markets equity research report titled; “Driver supply analysis looks healthy for the space; 4Q earnings preview” analysts Brad Erickson and Logan Reich wrote the following:
Is autonomous driving a good or bad thing for a stock like UBER?
Bears believe that UBER appearing “behind” other OEMs or suppliers working on proprietary autonomy solutions broadly points to mobility networks being excluded from capturing value from the future autonomous driving ecosystem.
Generally, we have concluded that the analogy of how smartphone value-creation ultimately shifted from hardware and carriers to software is most likely the source of this view. We think mobility networks like UBER (and others) are well situated to participate in the economics of the future autonomous ecosystem for a few critical reasons.
We believe that any future fully or partially autonomous transportation ecosystem will reflect a relative democratization of suppliers due to transportation’s essential status in society (similar to standards-essential patents in telecommunications for example).
Further, auto OEMs have disproportionate influence with regulatory bodies due to the vast number of people they employ as well as the meaningful product liability risk they represent. As such, we believe regulatory bodies are significantly incentivized to help OEMs maintain a multi-supplier approach no matter how critical or innovative new technology proves to be.
Finally, we believe that the industry’s onerous product liability operating mandates will likely impede auto OEMs’ attempts to expand into becoming a network provider due to competition limiting adequate scale and the operating requirements of running such a complex online marketplace being far outside an auto OEM’s core competency.
– Brad Erickson and Logan Reich, RBC Capital Markets | Driver supply analysis looks healthy for the space; 4Q earnings preview, February 4, 2024
Autonomous vehicles are good for Uber. Autonomous vehicles will allow Uber to continue their autonomous vehicle ambitions without the capital expense of developing their own program. Enabling the company to grow profitable revenue from platform access fees.
Today, Uber has autonomous vehicle partnerships with Waymo (Phoenix), Motional (Uber Eats in Santa Monica) and autonomous trucking partnerships with Aurora, Torc and Waabi.
The partnership approach is the right approach. Uber’s former approach to autonomy with their ATG (Autonomous Technology Group) program was a drag on earnings. In Q3 2020, the last quarter that Uber owned and operated Uber ATG, the company reported an adjusted EBITDA loss $104 million in the quarter from the program.
On January 19, 2021, Uber sold Uber ATG to Aurora in a stock and cash investment transaction. As part of the deal Uber invested in Aurora’s preferred stock. Since that moment, Uber has never looked back. Since then, the company has slimmed down, increased free cash-flow and embraced a partnership model while focusing on their core product, ride-sharing.
Uber’s Q4 2023 earnings clearly demonstrated Mr. Khosrowshahi’s model for Uber is working. In the quarter, Uber posted its first annual profit since the company went public on May 9, 2019.
If you are interested in learning more about Uber’s strategic pivot back to being a platform, we would recommend the following insight:
- Uber Goes Back to Its Roots (June 7, 2023)
Our take: Mr. Khosrowshahi is clearly the right CEO for Uber. He has implemented a strategy that is paying dividends for Uber shareholders.
Uber is a The Road to Autonomy Index component company
Auto Loan Delinquencies Continue to Rise
On February 6th, The Federal Reserve Bank of New York’s Center for Microeconomic Data released their Q4 2023 Quarterly Report on Household Debt and Credit report.
Auto loan balances rose by $12 billion to $1.61 trillion in Q4 2023, continuing an upward trajectory since 2011. While 7.7% of auto loans transitioned into delinquency.
In the same quarter U.S. credit card balances increased by $50 billion (4.6%) to $1.13 trillion. 90+ day delinquencies on credit cards increased from 4.01% in Q4 2022 to 6.36% in Q4 2023.
Credit card and auto loan transitions into delinquency are still rising above pre-pandemic levels. This signals increased financial stress, especially among younger and lower-income households.
– Wilbert van der Klaauw, economic research advisor at the New York Fed
Overall household debt increased by $212 billion (1.2%) in the fourth quarter of 2023 to $17.5 trillion up from $8.29 trillion in Q1 2004. Household debt has more then doubled in 19 years.
Could this economic environment with increasingly delinquent auto loans and credit cards lead to an increase in Uber rides? Uber rides are more affordable and most importantly do not require a credit check.
On February 7th, Uber reported Q4 2023 earnings which showed monthly active platform consumers (MAPCs) growing 24% in the quarter and 15% year-over-year. Gross bookings grew 22% year-over-year to $37.6 billion.
Could there be a correlation between an increase in Uber bookings and delinquent auto loans? Only time will tell, but this is a data point that we will be watching as we head into the spring and summer months.
Our take: The consumer is not financially healthy, despite the narrative that the media is currently portraying. We have only begun to experience the true impact of a Fed Funds interest rate of 5.33%.
Uber is a The Road to Autonomy Index component company
Improving Situational Awareness for Trailers and Unlocking Autonomy
Phillips Industries and Spartan Radar have partnered to jointly develop trailer blindspot detection devices powered by Spartan’s enhanced resolution radar software.
Backing a trailer up to a dock is challenging as there are obstacles and blindspots. Creating a potentially hazardous situation if the driver is not fully paying attention and/or over compensates for the blindspot.
Enter enhanced resolution radar. It’s the solution to a problem that leads to increased safety and overall operational efficiency. It’s operational efficiency that drives the traditional trucking market.
The market historically operates on a low-margin, high-volume model that is subjected to consumer spending and the overall economy. Every increase in efficiency leads to increased margins.
As the trucking industry changes and autonomous trucks are introduced into the mix, the overall efficiency is going to increase. Could Spartan’s radars further increase the overall efficiency of autonomous trucks?
If Spartan’s radars were applied to autonomous trucks and trailers, obstacle detection could potentially increase. Creating a more efficient autonomous trucking fleet. It’s not just trucks where Spartan can increase efficiency and lower costs, it’s also vehicles.
At CES 2024, Wipro and Spartan Radar demonstrated how a combination of improved cameras, radar, and software can achieve SAE Level 4 autonomy. The camera plus radar and software approach to autonomous driving could unlock scale as it’s cheaper than a LiDAR based solution.
If you are interested in learning more about Spartan Radar, we would recommend the following The Road to Autonomy podcast:
- The Next Generation of Radar, A Conversation with Dr. Matt Markel, CEO of Spartan Radar (June 20, 2023)
Our take: Radar is going to play a large role in the future of autonomy. 4D radar could very well surpass LiDAR as the key sensor to unlocking autonomy, as LiDAR is currently not scalable due to the present cost structure.
Social Buzz
Scaling Autonomy in The Golden State
In 2023, fully autonomous vehicles traveled 3,267,792 miles in California, over five times the previous year’s total.
If we apply the same math to 2024, autonomous vehicles will surpass 16.5 million miles this year in California. Then factoring in Waymo’s Los Angeles and San Francisco Bay Area expansion, autonomous miles driven in California could surpass 20 million.
Our take: Autonomous vehicles are scaling in California amongst the backdrop of regulatory uncertainty. We are getting close to the tipping point where the power will shift from special interests and their political friends to the public.
When you remove the hyperbole and press stunts from the equation, the narrative around autonomous vehicles is changing in California. The residents of California want this technology. Just spend some time talking and engaging with members of the public. The narrative changes. When the power dynamic shifts from the politicians to the public, the residents of California and California’s innovation economy win.
Waymo parent Alphabet is a The Road to Autonomy Index component company
Apple’s Not So Secert Weapon – Apple Stores
There are 272 Apple Stores in 44 states in the United States. Today, anyone can make an appointment to demo the Vision Pro at any Apple Store in the U.S.
As we are seeing with the Vision Pro, the Apple Store is a key ingredient to driving awareness and adoption of the Vision Pro as Robert Scoble rightly points out. Meta (Facebook) does not have stores. Meta was not built to sell hardware. As the Vision Pro scales, Meta will have to figure out a consumer demo + sales strategy for the Meta Quest line of mixed-reality headsets.
It’s Apple’s approach to retailing combined Apple users spending 5 hours a day on their Apple devices that will enable the company to successfully introduce and scale the Apple Car.
Today, you can visit any Apple Store to demo and buy products. In the future you will be able to make an appointment to take a test ride in the Apple Car and leave with an Apple Car subscription (Apple’s version of a lease).
An Apple Car subscription will accelerate Apple’s services business. In Q4 2023, Apple reported services revenue of $22.3 billion. Morgan Stanley is projecting services revenue to grow 11.9% with gross margins of 46% in 2024 and 14.5% with gross margins of 46% in 2025.
While services revenue is projected to grow, Morgan Stanley estimates that the average Apple user spent $303 in CY2023, down 7% year-over-year.
An Apple Car could increase the amount a user spends on Apple’s products and services. Could the Apple Car be the next great growth driver after the Vision Pro?
Only time will tell, but one thing we are certain about is that the Apple Store will be one of Apple’s key to success when they eventually introduce the Apple Car.
If you are interested in learning more about how the Vision Pro and how we envision it scaling to the Apple Car, we would recommend the following insight:
- First Vision Pro, Next Apple Car (June 14, 2023)
Our take: It’s only a matter of when, not if. At some point Apple will introduce the Apple Car. When the Apple Car is introduced, the automotive market will change. This will be Apple’s Tesla Model 3 moment. If you are a legacy OEM, prepare to be disrupted once again.
Apple and Tesla are The Road to Autonomy Index component companies
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 February 5, 2024, The Road to Autonomy Index returned 2.15%, the S&P 500 returned 1.4% and the NASDAQ 100 returned 1.81%.
The Road to Autonomy Index outperformed by the S&P 500 by 0.75% and outperformed the NASDAQ 100 by 0.34%
The top performing stocks in The Road to Autonomy Index this week were:
- Toyota Motor Corporation returned 12.59%
- NVIDIA returned 9.03%
- NXP Semiconductors returned 8.63%
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The Road to Autonomy podcast hosted by Grayson Brulte is a podcast featuring unconventional conversations about the future of mobility and the emerging autonomy economy. New episodes every Tuesday.
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A weekly newsletter featuring insight and commentary on the autonomy economy™ and how the financial markets are viewing its emergence.
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