Wall Street Agrees, Autonomous Vehicles are a Trillion Dollar Plus Market
June 23, 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 returned 0.44%, Wall Street is beginning to once again view autonomous vehicles as an investment opportunity, Tesla has been granted permission to test FSD in Shanghai and political maneuvering continues to undermine economic growth.
Some things never change. When an elected official has an agenda, progress stalls and the economy suffers. This is exactly what is happening in Delaware with the introduction of SB 258. The bill in its current form would effectively ban autonomous trucks in the state, hurting the state’s trucking economy.
In 2020, approximately 68.7 million tons of freight worth $101.3 billion moved to, from, or within Delaware. Ban autonomous trucks and that number will decline significantly in the future. Delaware and surrounding states will be at an economic disadvantage as a lot of freight runs through that corridor.
In 2021, trucks carried 21 million tons of freight worth $104 billion between major goods producing and consuming areas to the north and south of the Philadelphia region. The road that connects the corridor is I-95 and it runs right through Delaware.
If autonomous trucks are banned in Delaware, the I-95 corridor from Delaware to Maine will suffer long-term economic consequences inflicting economic damage for one’s own political gain. Putting politics above your constituents is not statesmanship, it’s morally wrong.
Autonomy is good for the economy. Autonomy will create jobs. It’s time to come together and put our political differences aside and do what is right for the American public and for the American economy.
Tesla is a The Road to Autonomy Index component company
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Autonomy Avenue Whispers
A Bright Week Ahead There are whispers abound on Autonomy Avenue that two announcements are coming next week that signal strength and commitment to the autonomy market.
What’s Moving the Markets
Wall Street Agrees, Autonomous Vehicles are a Trillion Dollar Plus Market
The tide appears to be turning on Wall Street in favor of autonomous vehicles. The Street is now beginning to view autonomous vehicles for what they truly are — a massive investment opportunity. Today, the hype is around GenAI, tomorrow the hype will be around autonomy.
Could these markets overlap in the future? That depends on who you ask. If you ask GenAI developers and tech investors, they will tell you GenAI in its current form has hallucinations and it is still in its infancy for autonomous vehicles and trucks. If you need further proof, just look at NVIDIA’s automotive earnings.
Ask engineers developing autonomous vehicles and trucks and they will tell you end-to-end autonomous driving has yet to be perfected. Any changes, even the most minute changes to the system will trigger a re-verification of the entire system. Adding hours, days and even weeks to the development cycle.
GenAI developers, tech investors and engineers alike agree, GenAI still has a way to go before it’s ready for prime-time powering autonomous vehicles and trucks. Yet, the GenAI can do everything hype train is showing no signs of slowing down. At the Computer Vision and Pattern Recognition (CVPR) conference this week in Seattle, NVIDIA won the Autonomous Grand Challenge for their end-to-end approach to autonomous driving.
While we are bullish long-term on the end-to-end autonomous driving opportunity, we are taking a cautious approach at this time due to the realities of current system architectures.
Chris Urmson, CEO & Co-Founder of Aurora wrote in a June 13th blog post about the challenges of alignment in end-to-end models that exist today.
Getting alignment correct for self-driving vehicles is critically important. Those naively attempting to solve self-driving using a pure end-to-end system will find themselves bogged down in a game of whack-a-mole, much like the folks delivering large language models have.
– Chris Urmson, CEO & Co-Founder of Aurora
While true today, in the future this will change as the technology evolves and companies such as Tesla and Wayve combine real-world driving data with simulation data to perfect their end-to-end models. In our opinion, without real-world driving data, the end-to-end approach will not succeed.
This is where Tesla shines. Currently, Tesla has over 9 billion miles of driving data where Autopilot has been engaged. On August 8th, when Tesla introduces the CyberCab, they will once again usher in a sea change. First it was electric vehicles, now it will be autonomous vehicles.
A change so profound that BofA Securities analyst Justin Post predicts it could reignite investor interest on Wall Street for autonomous vehicles.
Tesla’s Robotaxi day and further Waymo expansion (Austin & CA) could reignite Street interest.
– Justin Post, BofA Securities analyst in a June 20th, analyst report
How much of this renewed interest will translate into investments is unknown at this time. But we can confirm the interest is real, as we are getting calls from institutional investors every week with questions regarding autonomous vehicles and trucks.
The non-Softbank investment dollars are about to start flowing again in a big way as the interest in autonomous vehicles is real. This interest will translate into investments based on the calls and meetings we have been taking with investors.
The resurgent interest in autonomous vehicles is also being noticed by analysts. RBC analyst Tom Narayan currently values Tesla’s robotaxi/CyberCab business at $400 billion and Morgan Stanley analyst Adam Jonas currently values Tesla’s mobility and software opportunities at about $500 billion.
Wedbush analyst Dan Ives also sees the opportunity as well, assigning a $350 price target for Tesla giving the company a $1.1 trillion dollar market cap.
Ultimately the key to reaching a $1 trillion-plus valuation is the autonomous and Full Self Driving vision taking hold for Tesla which appears to be turning a corner with this latest FSD version 12.4 and now China FSD testing underway. Our bull case of $350 is built around Musk and Tesla finding success on FSD and the autonomous future.
– Dan Ives, Managing Director, Equity Research, Wedbush Securities in a June 21st analyst report
It’s not just Tesla, Justin Post, BofA Securities analyst currently views Alphabet’s Waymo as a $144 billion dollar revenue opportunity.
The [autonomous vehicle] market is vast, and each 1% of US annual miles driven could translate to $108 billion in revenue assuming a $3.50 revenue/mile. Assuming Waymo captures 3% of U.S. miles driven at $1.60/mile (more competitive with auto ownership), we get to a $144 billion revenue opportunity.
– Justin Post, BofA Securities analyst in a June 20th, analyst report
While John Murphy, Research Analyst, BofA Securities views Cruise as a multi-billion dollar opportunity inside of GM. Mr. Murphy’s note and our analysis are featured in the Cruise is Still a Tremendous Opportunity section.
The tide is turning, get ready and buckle up, autonomous vehicles are about to become the new It investment.
Our take: Autonomous vehicles are about to be in vogue once again. This time it won’t be fashionable for a quarter or two, it will become an economy that we call the autonomy economy.
Aurora investor Uber, Cruise parent GM, Tesla, Waymo parent Alphabet and Wayve investor Microsoft are The Road to Autonomy Index component companies
Cruise is Still a Tremendous Opportunity
Those are the words of John Murphy, Research Analyst at BofA Securities. Mr. Murphy highlighted the economic opportunity Cruise presents for GM in a June 11th research note.
Cruise is still a tremendous opportunity – Although Cruise had some material missteps in 2023, we continue to believe the technology provides an opportunity over the long-term as a “stand-alone” business for robotaxis in the order of magnitude of $1bn in EBIT/major city. In addition, the technology could be leveraged to differentiate GM’s core retail / fleet products.
– John Murphy, Research Analyst, BofA Securities, June 11, 2024 Research Report
Distributing Cruise’s technology through various GM products will enable GM to gain market share, increase auto sales and truly compete with Tesla. When Tesla introduces the CyberCab on August 8th, executives in the traditional auto business will be faced with a big question. What to do?
If these executives make the wrong decision, they will be faced with years of uncertainty, sluggish growth and poor stock performance. As Tesla is once again about to disrupt the auto business, but this time it’s different — GM is prepared.
GM has Cruise and a strategy that can deliver for shareholders. Only time will tell if GM can correctly execute on that strategy.
Our take: We will look back in history and compare the decisions made by Ford with Argo AI and GM with Cruise. One made the right decision and one made the wrong decision. Only time will tell who chose wisely.
Cruise parent GM and Tesla are The Road to Autonomy Index component companies
Tesla Gets Approval to Test FSD in Shanghai
On June 17th, Bloomberg reported Tesla has been granted approval to test FSD in Shanghai, soon to be followed by Hangzhou. Tesla’s FSD expansion into China clearly signals Tesla views China as a growth market for both FSD and their soon to be unveiled robotaxi business.
The math – every 10% uptake on ~2MM fleet is only ~3c EPS as FSD China likely only can charge $50/month (comped to Zeekr, XPEV, NIO offerings).
– Chris McNally, Head of Global Auto & Mobility Research, Evercore ISI
While the initial rollout will have a limited upside, our long-term view is that China will eventually become one of the largest global markets for FSD / robotaxi. This will put Tesla in direct competition with homegrown autonomous vehicle companies Baidu, BYD (emerging personally owned autonomous vehicle program) and Pony AI.
Tesla and Baidu have a mapping partnership that dates back to 2020. Recently that partnership was expanded to include road-level guidance in an effort to satisfy state regulators’ concerns over data as Tesla prepares to introduce FSD in the country.
With the support of Baidu’s lane-level map, Tesla’s navigation can accurately render lane changes on the road the user is currently on, upgrading from providing road-level guidance to providing lane-level guidance.
– Baidu statement on the expanded partnership
When FSD is launched in China and perhaps followed by robotaxis at some point in the future, how will the homegrown Chinese autonomous vehicle market respond? What moves will they make to counter this potential threat? Will BYD accelerate their plans for personally owned autonomous vehicles?
A lot is going to change in the Chinese autonomous vehicle market once Tesla scales FSD and introduces a robotaxi service (with a local partner). Tesla could very well make Baidu if the partnership is successful.
If that happens, all eyes turn to Pony AI.
Our take: A Cruise/Waymo moment is about to unfold in China.
BYD investor Berkshire Hathaway, Cruise parent GM, Pony AI investor Toyota, Tesla Waymo parent Alphabet are The Road to Autonomy Index component companies
Political Maneuvering Undermines Economic Growth
Another day, another misleading story about safety and autonomous trucks. This time, the newsreel comes to us from the Delaware State Senate where political leaders are engaged in strategies that prioritize special interests and marginalize reality by putting short-term political gains over long-term economic prosperity.
When reading SB 258 it becomes very clear what the motives behind this bill truly are and who the bill stands to benefit from it. Hint, it’s not the Delaware economy.
This Act prohibits any autonomous vehicle with a gross weight of 10,001 pounds or more from being operated on a Delaware highway for testing purposes, transporting goods, or transporting passengers without a human safety operator being physically present within the autonomous vehicle.
– Delaware Senate Bill 258
Without a human safety operator being physically present within the autonomous vehicle is unfortunately going to be a line that becomes all too common in state legislatures around the country as autonomy ramps up. This line is not added because of safety concerns, it’s added because special interests are demanding it.
Putting the interests of special interests above those of the citizens of the state is without merit. It’s time to put politics aside and come together for the benefit of society and the economy.
The longer autonomy is delayed by political tactics, the longer the U.S. economy will be a strategic disadvantage compared to the rest of the world. Autonomy will create jobs and usher in an economy that we call the autonomy economy.
Our take: Autonomy is good for the economy. Politics are bad for the economy.
Social Buzz
Off-Road Autonomy
Applied Intuition is one of the most interesting companies in autonomy today. With the announcement of their new off-road autonomy stack, the company further reinforced their leadership position in the development and testing of autonomous vehicles, trucks and off-road vehicles.
We are looking forward to hosting Qasar and Peter on an upcoming episode of Autonomy Insights.
Our take: Applied Intuition is on their way to becoming the AWS, Azure and Google Cloud of autonomy.
Cashin’ In On The GenAI Hype
On June 18th, Waabi announced they successfully closed their Series B round of $200 million. While impressive and overall very good for the autonomous trucking industry, we view this funding round with skepticism.
When Waabi first entered the fundraising market back in October of 2023, NVIDIA was trading around $41 a share (post-split) and the GenAI hype had yet to take hold.
Since that moment roughly nine months ago, NVIDIA has soared over 200%, doubling investors’ money while the FOMO trade continues to roar (but for how much longer?). While this return is nothing short of impressive, we cannot stop thinking about the Great Railway Mania of the 1840s and the British Bicycle Mania of the 1890s.
During both times in history, investors and the public alike expressed euphoria over the investment opportunities and the potential outsized returns they could earn.
Sound familiar? There is a pattern here. One that says history is once again repeating itself, only this time instead of trains and bikes, it’s GPUs.
We can learn a lot from studying history, and if you are interested in learning more about financial bubbles, we would highly recommend Boom and Bust, a Global History of Financial Bubbles by William Quinn and John D. Turner.
Our take: As the old saying goes: “life is all about timing”. With a little luck, Waabi timed this well. The only question is, what happens when the bubble bursts?
Waabi investors NVIDIA and Uber are 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 June 17th, The Road to Autonomy Index returned 0.44%, the S&P 500 returned 0.60% and the NASDAQ 100 returned 0.21%. The Road to Autonomy Index underperformed the S&P 500 by 0.16% and outperformed the NASDAQ 100 by 0.23%.
Year to Date (YTD), The Road to Autonomy Index has returned 12.53%
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Dr. Matt Markel, Business Leader, Radar & Autonomy Expert with experience at Waymo and in the defense industry joined Grayson Brulte on The Road to Autonomy podcast to discuss the NHTSA mandate requiring AEB (automatic emergency braking) systems in all new light vehicles by 2029 and what impact this mandate will have on the development of autonomous vehicles.
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Tuesday, June 18, 2024
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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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