AUTONOMY LEADERBOARD July 2024 Update
July 21, 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 2.93% and we are proud to present the July 2024 AUTONOMY LEADERBOARD update.
The AUTONOMY LEADERBOARD reflects our opinion on who the leaders are in the emerging autonomy economy. When we first launched the AUTONOMY LEADERBOARD on April 25, 2024 we were focused solely on autonomous vehicles and trucks. Since then we have expanded to include personally owned autonomous vehicles, software platforms and software providers.
In the following quarters we will be adding more categories and companies to the AUTONOMY LEADERBOARD. As part of the July 2024 update, we have introduced a new refreshed look and Outlooks. Outlooks is our unique take on analyst ratings.
Outlooks
- Bullish – Companies that we believe will be main components of the autonomy economy.
- Positive – Companies that currently have a positive outlook and a clearly defined path towards commercialization.
- Break Out – Companies that are poised to break out and gain marketshare.
- Neutral – Companies where there are business uncertainties and long-term questions about the business still remain.
Each quarter ratings could potentially change depending on how the businesses are performing and how investors are viewing their performance. In the essence of Ben Graham’s famous line, “In the short run, the market is a voting machine, but in the long run, it is a weighing machine”.
It is our hope is that Outlooks will act as a bellwether offering clearer insight into a market that is emerging until select companies emerge to become the bedrocks of the autonomy economy. When select companies achieve bedrock status, the market will then have acted as a weighing machine.
Only time will tell which companies will eventually succeed and grow into long-term profitable businesses that grow revenue quarter-over-quarter. Until then, there is the AUTONOMY LEADERBOARD.
Moving forward, we will be publishing a quarterly letter detailing our thoughts and rationale behind each quarterly update. This quarter’s letter is Coalescing Around The Leaders.
The next AUTONOMY LEADERBOARD update is scheduled for October 20, 2024.
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What’s Moving the Markets
Coalescing Around The Leaders
Over the past quarter there has been a lot of change in the emerging autonomy economy. Select companies are now beginning to emerge and cement themselves as leaders while others struggle to find a path forward as they seek the exit ramp. Current market conditions are an indicator of a healthy market. A market that is both resilient and adaptable to change.
If everything went up and to the right, the market would be extremely unhealthy and reminiscent of 2019-2021 when we were in the depths of the trough of disillusionment. Since then the tide has gone out and to paraphrase Warren Buffet we learned who was swimming naked when the tide went out.
There were a lot of naked swimmers during those days, even one’s pretending to wear bathing suits as their vaporware began to wash away any remaining fabric of truth. To quote Benjamin Graham; “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”
Indeed it is, and Mr. Market rightfully did his job as he always does. After the euphoria evaporated, the autonomy economy went into a mild recession as companies struggled to raise capital and were forced into acquihires and liquidations. While investors lost money, they mostly did not lose faith in autonomy and the emerging autonomy economy.
Fast forward to July 2024 and a lot has changed. The market has corrected itself and the companies that survived the autonomy recession are stronger today. Kodiak founded in 2018 on the cusp of the autonomy recession survived and they are thriving, having earned the #1 spot on the leader in the autonomous trucking category for two quarters in a row.
Kodiak was able to survive the autonomy recession and build the Kodiak driver because of management’s keen understanding of economics and geopolitics. While it has not raised the billions of dollars other companies have, Kodiak survived and thrived because they operate in a cost efficient manner. As the odds of a soft-landing in the U.S. economy deteriorate by the day, operating a company with financial discipline is a key to success.
Kodiak’s biggest competitor, Aurora, was founded a year earlier in 2017. They similarly survived the autonomy recession and have grown to great heights. The company went public on November 4, 2021 during the height of the SPAC bubble and the beginning of the autonomy recession.
Unlike most of their peers that went public via SPAC, Aurora has survived and grown their business as they prepare for driver-out operations later this year. Earning the company the #1 spot on the leaderboard for autonomous trucking category for two quarters in a row.
While one can second guess the decision to go public and play Monday morning quarterback, one has to give credit where credit is due. Aurora survived. They are still public and as investors have shifted from the MAG7 into small caps, Aurora has been a beneficiary of that rotation. Over the last month, Aurora’s stock has returned 91.40%.
If you zoom out and benchmark Aurora’s stock performance Year to Date (YTD) against a basket of publicly traded LiDAR companies (Aeva, AEye, Hesai (ADR), Innoviz, Luminar, Ouster), Aurora has outperformed the basket by 119.75% YTD.
Investors who are investing in LiDAR companies are betting on the future of autonomy. But as we can see from the data, investors are now shifting their interest to vertically integrated autonomous vehicle companies.
Aurora is both a developer of autonomous driving software and LiDAR software/hardware. Over the years, Aurora has acquired two LiDAR companies: Blackmore in 2019 and OURS Technology in 2021. These purchases have eliminated the need for Aurora to be solely dependent on 3rd-party LiDAR manufacturers. Waymo has a similar strategy as they developed their own LiDAR in-house called Laser Bear Honeycomb.
In our opinion, the moves made by both Aurora and Waymo have had material impacts on the LiDAR market. As the independent publicly-traded LiDAR market continues to struggle, we expect to see several acquisitions since LiDAR still plays a vital role in enabling SAE Level 4 autonomy for now.
Then there is the Elon Musk issue of LiDAR being a “crutch” to enable autonomy. He Xiaopeng, CEO of XPeng, is now adopting a similar philosophy as XPeng is moving away from LiDAR for their new F57 model. Are these signals to the market that the end of LiDAR is near? We believe the days of LiDAR being the dominant sensor enabling autonomy will change over the next decade. This is a move that will be driven both by performance and cost.
As clarity on who the leaders are in autonomy emerges, investor dollars are beginning to once again flow into autonomy. This quarter, Wayve successfully raised $1.05 billion in a round led by Softbank and Waabi successfully raised $200 million in a round led by Uber and Khosla Ventures.
Since May 1, 2024, $2.7 billion has been invested in autonomous vehicle and autonomous truck startups. This is with a backdrop of sovereign wealth funds and multi-strategy hedge funds continuing to look for opportunities to deploy capital.
Funds are now targeting autonomy as an investment opportunity because autonomy is now a business. It is no longer a question of will it work, it’s now a question of how big can this get mentality. The individuals leading autonomy companies are focused on revenue and building long-term profitable businesses as they continue to develop the technology and funds are taking notice.
What is different this time is that we are starting to see investors and the market coalesce around a handful of companies that are represented on the AUTONOMY LEADERBOARD. In the autonomous vehicles category, the market is once again consolidating around Cruise and Waymo.
Cruise and Waymo continue to be the de facto leaders in the development of robotaxis. Despite the hiccups that Cruise has faced over the last year, we remain positive on the company upgrading it to #2 in the autonomous vehicle category on the leaderboard with a positive outlook, as GM has shown a firm commitment to Cruise.
With a potential change in administration on January 20, 2025, GM is extremely well positioned to handle potential 100% to 200% tariffs on vehicles imported from China, while Waymo is vastly underprepared.
Adding to Waymo’s woes is the discontinuation of the Jaguar I-Pace come December and their vehicle partnership with Chinese manufacturer Zeekr (owned by Geely Auto). Then factor in the coming Chinese software in autonomous vehicles proposed rule soon to be released by the Biden Commerce Department and Waymo has even a bigger vehicle problem.
In our opinion Waymo needs a new vehicle partner and a new vehicle strategy. Cruise does not, as they have GM who will manufacture the Cruise robotaxis in America. Built in America, no tariffs. Built in China, tariffs. Tariffs so large they could have a negative economic impact on the Waymo business model.
Not to mention the issue of public trust. Will the American public want to ride in a Chinese manufactured vehicle? We remain skeptical as 81% of U.S. adults currently view China unfavorably according to a Pew Research Center survey.
Then there is the issue of a potential Alphabet breakup in a second Trump administration. If Alphabet were to be broken up, who would step-up and fund Waymo or outright buy it? We are pondering these questions and what the long-term implications of tariffs and a potential breakup could have on Waymo. For now, Waymo has retained their #1 ranking in the autonomous vehicles category on the leaderboard with a bullish outlook, because as of now their business is firing on all cylinders.
A company that seemingly does not want to become a business despite their technology is Zoox. This quarter we downgraded Zoox to #3 in the autonomous vehicles category on the leaderboard with a neutral outlook. Our ranking and outlook is partly based on a lack of urgency to build a sustainable business. Zoox is a company that seems adrift with no clear commercial strategy. Why?
When Cruise faced their hiccups Zoox had the opportunity to seize on that opportunity, yet they were asleep at the wheel with no sense of urgency and a seeming lack of strategy. Why? What role is Amazon playing in decision making?
There are a lot of questions about Zoox’s long-term strategy and how it fits into Amazon. We call on Mr. Andy Jassy to publicly address Amazon’s long-term vision for Zoox. What does Amazon hope to achieve with Zoox? Will Amazon ever introduce an Amazon Prime Mobility Tier?
The market has questions as Amazon continues to sink billions of dollars into a venture that seemingly does not want to become a business. Zoox remains in the leaderboard solely for their technology, not for their business acumen or messaging skills.
Wayve remained at #4 in the autonomous vehicle category on the leaderboard this quarter with a positive outlook. We remain positive on Wayve and the company’s cost-effective approach to autonomy that they call AV 2.0.
New to the leaderboard this quarter is May Mobility. May Mobility has entered the autonomous vehicle category of the leaderboard at #5 with a breakout outlook. We believe that May Mobility is the little engine that could have autonomy as they have a proven business model that is scalable. With NTT being one of their largest investors, we fully expect May Mobility to expand to Japan in the coming years to capitalize on the country’s aging population and driver shortage trends.
Falling off of the autonomous vehicle category on the leaderboard this quarter was Motional. As they exit stage left, we wish the company well and hope Hyundai eventually uses Motional’s technology to develop personally owned autonomous vehicles for the Genesis brand.
Keep a deadline, ignore a deadline or just flat out not care. Either way in the end, Tesla delivers. Tesla creates new markets. They did this with electric vehicles and they are going to do it again with personally owned autonomous vehicles. It’s only a matter of time until Tesla “cracks” FSD (Full-Self-Driving).
Tesla has entered the leaderboard for the first time this quarter with a ranking of #1 in the new personally owned autonomous vehicles category with a bullish outlook. As Tesla proves the market wrong and personally owned autonomous vehicles gain traction, Tesla will continue to be one of the most important companies in autonomy.
From the roads to the highways, enter autonomous trucks. The market for autonomous trucks is beginning to consolidate around Aurora and Kodiak with Daimler Truck and Volvo Autonomous Solutions gearing up to play significant roles.
While we have not yet added truck OEMs to the AUTONOMY LEADERBOARD, we are keeping a keen eye on Scania as the company expands their autonomous mining operations globally. Autonomous mining is an area of autonomy that we view with a bullish outlook and at some point in the future mining will be added to the leaderboard. In addition to Scania, Volvo Autonomous Solutions has a growing autonomous mining division with it’s own in-house policy team.
Looking from the outside is PACCAR. We continue to question their commitment to autonomous trucking even with their Aurora partnership. PACCAR has yet to demonstrate a desire to play a significant role in the future of autonomous trucking outside of testing partnerships.
The way the truck OEM market is shaping up, Daimler Truck and Volvo will become the two most important truck OEMs in autonomy. Combined they have over 50% of the U.S. market share for heavy-duty trucks in addition to a software-defined vehicle platform joint-venture.
The future of autonomous trucking has yet to be written, but the market is clearly speaking as it consolidates around the Big 4: Aurora, Kodiak, Daimler Truck and Volvo. Even with this consolidation, there is still room for another player to enter the sector and gain significant market share.
This is exactly what Torc, Waabi and Stack AV all are vying for. While they vie for it, we are unsure if one of them will eventually emerge to challenge the Big 4. Torc is majority owned by Daimler Truck, but being in a marriage can be challenging at times.
This quarter Torc retained the #2 position in the autonomous trucking category on the leaderboard, but we assigned a neutral outlook because of the reported strain in their marriage with Daimler Truck. Then there is Waabi, #3 in the autonomous trucking category of the leaderboard with a neutral outlook.
Despite having recently raised $200m, we have concerns about the company’s over dependence on Raquel Urtasun. Could Waabi survive if Ms. Urtasun were to step down? Is the technical talent bench strong enough to withstand a change in leadership?
Rounding out the autonomous trucking category of the leaderboard is Stack AV at #4 with a neutral outlook. Where Stack goes from here depends on Softbank CEO Masayoshi Son. No matter how good Stack’s technology becomes, their future is controlled by one individual, Mr. Son.
As the sole investor, Mr. Son calls the shots. What happens if Mr. Son decides to redirect Stack’s funding into the latest AI investment craze? If that were to happen, Stack would unfortunately have no path forward unless they can diversify and attract outside investors. Over the next year, Bryan Salesky will have a series of hard decisions to make.
Business is all about making decisions. Don Burnette is making all of the right decisions at Kodiak as his bet to expand into defense is paying off. On the heels of Kodiak’s $49.9 million Army Robotic Combat Vehicles (RCV) program award, the company was named to the Silicon Valley Defense Group’s NATSEC100 list for the first time ever.
With the wind at their back, we upgraded Kodiak to #1 in the autonomous ground vehicle defense category on the leaderboard and assigned a bullish outlook. Forterra dropped from #1 to #2 with a positive outlook, we remain positive on Forterra’s business long-term. New to the ground vehicle defense category this quarter is Overland AI at #3 with a positive outlook.
Rounding out the leaderboard this quarter we added two new categories: Software Platforms and Software Suppliers. Despite what talking heads on CNBC want you to believe, Uber will play a very large role in the future of autonomy. Uber has joined the software platforms category of the leaderboard at #1 with a bullish outlook.
Dara Khosrowshahi, CEO of Uber has taken Uber back to its roots — being a platform. A platform that is going to act as the Visa/Mastercard of autonomy. Joining Uber at #1 in the software platforms category on the leaderboard is Uber Freight.
Even though they are “technically” the same company, both Uber and Uber Freight are inherently different businesses with a common denominator — a platform. Uber will enable autonomous vehicles to scale in a similar fashion to the way Uber Freight will enable autonomous trucks to scale.
Then there is the software supplier category. As autonomy becomes more complex and we move towards software defined vehicles, companies will continue to require a platform to build and test on. That platform is Applied Intuition.
With 18 of the top 20 automakers across the globe using their platform, they are doing something right. This earned the company the #1 ranking in the software supplier category of the leaderboard with a bullish outlook.
While we do not know where the market is going to head tomorrow, we do know that autonomy is going to become an economy that we call the autonomy economy.
Until next quarter.
Piquing Our Interest
The LiDAR Woes Continue The decision by XPeng to move away from LiDAR for its upcoming P7+ model represents another unfavorable development for the LiDAR industry according to BofA Global Research. As we wrote about last week, the LiDAR market is collapsing with a combined market cap of $2.431 billion (July 12, 2024) there appears to be little investor appetite for pure-play LiDAR companies.
Global Oil Demand Continues Goldman Sachs Research is forecasting in its base case, oil demand will peak at 110 million barrels a day by 2034. In a scenario with slower EV adoption, oil demand could keep increasing towards 113 million barrels a day by 2040.
Breaking Up Alphabet? In a second Trump administration if Alphabet were to be broken up as Vice Presidential Candidate J.D. Vance wants to do, what would happen to Waymo and who would fund it? Would a sovereign wealth fund enter stage left?
Expanding to SFO? Waymo has interest in expanding service to the San Francisco International Airport (SFO). When this will happen is anyone’s guess, but when it does it will be a positive for both the airport and Waymo.
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 15th, The Road to Autonomy Index declined 2.93%, the S&P 500 declined 1.97% and the NASDAQ 100 declined 3.65%. The Road to Autonomy Index underperformed the S&P 500 by 0.96% and outperformed the NASDAQ 100 by 0.72%.
Year to Date (YTD), The Road to Autonomy Index has returned 14.47%
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