Ford Bets on Partial Autonomy, GM Bets on Full Autonomy as Cruise Powers Ahead

This Week In The Road to Autonomy Index — For the week of August 7, 2023, The Road to Autonomy Index declined 2.0%, while the S&P 500 declined 2.6%. The Road to Autonomy Index outperformed the S&P 500 by 0.6%.

The top performing stocks in The Road to Autonomy Index this week were Caterpillar which returned 3.18%, AutoNation which returned 2.58% and Berkshire Hathaway which returned 2.39%.

On this episode, Grayson Brulte discusses the 2023 J.P. Morgan Autos Conference and the investor sentiment coming out of the conference. The investor sentiment is that autonomy is investable. While autonomy is viewed by investors as being investable, companies developing autonomy solutions are taking differentiated approaches.

Ford is taking a partial autonomy approach, with the goal of unlocking services revenue that the company projects at $2,000 per year, per vehicle. Then if you factor in non-software solutions – connected commercial insurance, the potential revenue forecast increases to $4,000 to $5,000 per vehicle annually. Over a three year lease, there is the potential for Ford to generate $12,000 to $15,000 in services revenue.  

Jim Farley, CEO of Ford is predicting that their services business will grow over 1,000% over the next few years. Today, Ford’s services business generates gross margins above 50%, compared to the 8.3% margin before interest and taxes that Ford had in this year’s first half.

Then there is GM which is taking a full autonomy approach with Cruise. Cruise is expanding at a significant pace and driving more than 1 million driverless miles a month. The number of driverless miles is going to increase as Cruise expands to more cities and 24/7 operations begin in San Francisco. 

At the J.P. Morgan Autos Conference, Paul Jacobson, Chief Financial Officer of GM presented and spoke about Cruise scaling their operations. As part of the Q&A session, Grayson Brulte asked Mr. Jacobson how Cruise was managing their rapid expansion – the answer in a nutshell was Gil West. 

Gil West is the Former COO of Delta and now COO of Cruise. Is Mr. West and his team one of the keys to Cruise’s success? Yes. Mr. West is using his vast knowledge of operating large complex transportation businesses with challenges such as weather and ground operations.

To scale an autonomous vehicle company, you need the right executive bench with the right experience. Is one of the keys to running and scaling a successful autonomous vehicle or truck business having a strong Chief Operating Officer?

Cruise with Gil West and Kodiak with James Reed, former CEO of USA Trucks as COO are out maneuvering their competition and gaining significant market share. Based on the data, one can make the compelling argument that a strong COO matters.

With the recent California Public Utilities Commission ruling to allow Cruise and Waymo to operate 24/7 in San Francisco and charge for rides, the groundwork for the autonomy economy is being paved. While the groundwork is being paved, the City of San Francisco is contemplating litigation against the commission. Why take this step when autonomous vehicles in San Francisco are only going to help the City’s economy? 

The CPUC ruling was favorable for the residents of San Francisco, visitors to San Francisco, the San Francisco economy and the entire autonomous vehicle industry. Next up, AB 316. Will California side with the Teamsters and effectively ban autonomous trucks in the State? Or will the State side with progress, lowering inflation and creating jobs?

We will soon find out. What we do know today is that autonomy is good for the economy. Today we are merely at the starting line for what is to come with autonomy and its economic impact on society. We are at the dawn of The Autonomy Economy.

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The Road to Autonomy Index®

The Road to Autonomy Index is an autonomous vehicle index comprised of 38 publicly-traded companies. The Index is a rules-based equity benchmark index that is calculated by Standard and Poor’s Dow Jones Indices. The Index measures the performance of a basket of global companies that are involved in the development and commercialization of autonomous driving technologies.

Included in the Index are companies that are developing autonomous vehicles (self-driving cars), autonomous trucks and off-road specialty vehicles. As well as transportation, technology, industrial and services companies that have identified autonomy as a key component of their growth strategies. 

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