Waymo On The Road to a Spin Out
January 28, 2024
This Week in The Autonomy Economy, The Road to Autonomy Index returned 0.37%, chatter about Alphabet potentially preparing to spin out Waymo is heating up. Waymo’s expansion plans in California became public as the City of San Francisco sues California over the expansion of commercial robotaxi operations.
Apple is reportedly preparing to introduce an SAE Level 2 electric vehicle in 2028 that will be “upgradable” to Level 4, Ryder’s autonomous trucking strategy comes into full view and Caterpillar expands autonomous mining operations in Canada.
It was a busy week in the autonomy economy.
Alphabet, Apple, Caterpillar and Ryder are The Road to Autonomy Index component companies
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What’s Moving the Markets
Is Alphabet Preparing to Spin Out Waymo?
On January 22nd, Bloomberg reported that Alphabet’s Moonshot X Lab is cutting jobs, ramping up outside funding conversations with investors and adopting a new structure that’ll enable its projects to more easily spin out of X as independent startups with support from Alphabet and outside backers.
Could this be the first step in Alphabet’s plans to spin out Waymo as an independent company with additional outside investors, even though Waymo graduated from X in 2016?
We believe so. The groundwork for such a move was put in place on July 25, 2023 during Alphabet’s Q2 2023 earnings call when the company announced that Ruth Porat, CFO will be transitioning into the newly-created role of President and Chief Investment Officer of Alphabet and Google on September 1st.
The following day, Waymo announced that they would be shutting down their Waymo Via (autonomous trucking) program to solely focus on robotaxis. It turns out that Waymo in fact did not shut down the program entirely, they merely scaled back their efforts and put it “on hold”.
This summer Waymo is due to take possession of their autonomous-ready redundant Daimler Freightliner Cascadia trucks that were part of their original partnership agreement with Daimler. What Waymo plans to do with their new autonomous-ready redundant Daimler Freightliner Cascadia trucks remains a mystery.
When Waymo takes possession of these trucks, could they look to possibly revamp their autonomous trucking program? If Waymo does indeed revamp the program, we would suggest that the company hires truckers to run the division and be a part of the Waymo Via executive leadership committee.
Circling back to the notion of a possible spin out, if Alphabet does indeed spin out Waymo as an independent company, what valuation would the company receive in the market? To what extent would the potential to ramp up autonomous trucking play in the valuation?
There is a lot to unpack here and this is a topic that we will continue to follow and offer our insights as it evolves. What is very clear to us is that Ruth Porat is looking to create shareholder value by reducing expenses and increasing the overall operational efficiency of Alphabet.
Our take: Interesting times ahead for Waymo as Alphabet prepares for a potential spin out. If Alphabet does indeed spin out Waymo, TCI Fund Management’s letter from November 15, 2022 could be viewed as a catalyst for this move.
Alphabet is a The Road to Autonomy Index component company
California Dreaming, Waymo’s Big Expansion
On January 19th, Waymo sent a letter to the California Public Utilities Commission (CPUC) seeking permission to expand commercial robotaxi operations in Los Angeles (250 square miles) and the San Francisco Bay Area (160 square miles).
If approved Los Angeles will become Waymo’s largest service area to date. In Arizona, Waymo’s service area is currently over 225 square miles in areas including Phoenix, Scottsdale, Chandler, Gilbert, Mesa, and Tempe.
With all of Waymo’s service areas combined, the company will be operating a 635 square mile service area. Giving Waymo a massive competitive advantage when it comes to the economics of the robotaxi business.
In 2024, we expect Waymo to bring Austin, Texas online followed by announcement that Miami will be next.
Our take: Waymo is the robotaxi industry. Given Alphabet’s investment and patience to turn Waymo into a real business, we do not see any real viable competitors in the near future. The market has been set.
Waymo parent Alphabet is a The Road to Autonomy Index component company
Apple Car Delayed to 2028 with a Focus on Level 2
On January 23rd, Bloomberg reporter Mark Gurman reported that Apple is dialing back their initial Apple Car plans aka Project Titan to 2028. Instead of focusing on developing and deploying an SAE Level 4 system, Apple is now reportedly focusing on developing an SAE Level 2+ system for the initial launch of the Apple Car.
From a headline perspective this is a wise move, but in our opinion it is a long-term strategic blunder. Even though Mr. Gurman reported that Apple “hopes” to release an upgraded system that supports Level 4 autonomy after the initial launch.
For Apple to truly “crack” the car market and introduce a Level 4 autonomous vehicle, it should not be an “upgradeable” vehicle. It must be a vehicle that is built from the ground up for the in-vehicle passenger experience.
A Level 4 autonomous vehicle will enable Apple to continue the growth of their services business. In Q4 2023, Apple reported an all-time record of $22.3 billion in services revenue, a 16% year-over-year increase. Furthermore, an Apple Car would give Apple the ability to scale their spatial computing platform — visionOS.
The future of visionOS is not the Apple Vision Pro, it’s the car and the services business. When Apple finally introduces an Apple autonomous vehicle, the glass in the vehicle will be augmented with visionOS running in the background.
At CES 2024 we got the first glimpse of what this could potentially look like with the introduction of the LG transparent OLED TV.
Imagine this display became the windows of the vehicle? Imagine if you could simply say “Hey Siri”, watch Killers of the Flower Moon or “Hey Siri” order a Starbucks for the journey, or “Hey Siri” order tickets for the Taylor Swift concert in Miami and show me a preview of the seats.
The Apple car is not about being a car, it’s about being a commerce platform. One that will drive significant recurring services revenue to the bottom line. How much services revenue can be derived from the car is yet to be determined, but Apple has the user base.
Our installed base of over 2 billion active devices continues to grow at a nice pace and establishes a solid foundation for the future expansion of the ecosystem. And we continue to see increased customer engagement with our Services. Both transacting accounts and paid accounts grew double-digits year-over-year, each reaching a new all-time high.
– Luca Maestri, CFO of Apple on the Q4 2023 earnings call (November 2, 2023)
A user base that engages with their Apple products on an average of 5 hours per day. But how do you introduce a new product such as an autonomous vehicle that requires a learning curve to the user base? Apple could follow Waymo’s model of the Waymo Tour and go by city, but that is time and capital intensive. Apple’s advantage — Apple Stores.
Currently there are 273 Apple Stores in the United States. Interested in ordering and experiencing the Vision Pro in person? Where do you go? The Apple Store. This same model could be applied to the introduction of the Apple autonomous vehicle. Head over to the Apple Store, take a ride and leave with an Apple Car subscription.
This is where we believe Apple is heading. It’s a bright future and the introduction of an Apple Car with a Level 2+ system is merely just the starting point.
Read our First Vision Pro, Next Apple Car insight for a deeper analysis.
Our take: The way the market is currently looking, Tesla and Apple could end up being the #1 and #2 EV makers in the United States over the next decade. Why? The user experience. This is what a majority of the legacy OEMs fail to realize and understand. The vehicle of today is not the vehicle of tomorrow or a vehicle that a majority of consumers want to buy. Consumers want the future. This is why they buy Tesla’s today and Apple Cars tomorrow.
Looking to the future, as Tesla continues to invest in FSD (Full Self-Driving) and Apple continues to march forward on Project Titan, legacy OEMs are going to be alarmed at the growth of the personally owned autonomous vehicle market. The time to pay attention is now.
Apple and Tesla are The Road to Autonomy Index component companies
Ryder and The Autonomous Truck Ecosystem
Ryder continues to show their strategic strength as a partner, investor and friend to the autonomous trucking and logistics industry. Through their current strategic partnerships with Aurora and Kodiak along with previous partnerships with Embark and TuSimple, Ryder has become the de facto ecosystem provider for terminals and maintenance.
Their leadership strength carries over to Torc’s Announces Advisory Council. Ryder is a member and as part of their role, they are providing insights into the freight industry and managing trucking operations at scale.
Their role does not end with only being a partner or a board member, Ryder is also investing in the sector through RyderVentures. In October 2021, RyderVentures invested in Gatik as part of their $85 million fundraising round. In addition to the investment Ryder and Gatik entered into a fleet servicing and maintenance partnership.
Then there is Waymo Via. Ryder has a partnership with Waymo which is currently “on hold”. In last week’s newsletter and earlier in this newsletter we alluded to the fact that Waymo is preparing to possibly spin-up Waymo Via again. While there is no confirmation, the chatter around this possibility continues to grow was Waymo Via’s public partners keep referring to their to their partnerships being “on hold”.
Something is clearly brewing over at Waymo as it relates to autonomous trucking. We will just have to sit tight and wait to see what happens. If and when, Waymo does re-enter the autonomous trucking sector, it will be healthy for the industry as further consolidation is soon to get underway.
The approach undertaken by Ryder has given the company a seat at the table for the development and commercialization of autonomous trucking. It’s a strategy in that more companies should undertake. It’s a low-risk, high-reward strategy that will pay dividends as the technology sales.
In their October 2023 Investor Supplement Segment Overview, Innovation, Financials and ESG, the company highlighted their autonomous vehicle strategy to investors.
Read the complete investor supplement here (PDF).
This strategy would not be possible without Mike Plasencia. Mike along with his team has positioned Ryder for a bright future. A future that is autonomous. He is a friend to the industry, a leader and someone who is always thinking two steps ahead of the competition.
If you are interested in learning more about how Ryder is developing the autonomous trucking ecosystem, we would recommend the following The Road to Autonomy podcast:
- Creating Value Through Services, A Conversation with Mike Plasencia, Group Director, RyderVentures & New Product Strategy at Ryder System, Inc. (April 12, 2022)
Our take: It could be said, without Ryder’s commitment to the sector, scaling commercial autonomous truck would not be possible.
Ryder System Inc. is a The Road to Autonomy Index component company
Social Buzz
San Francisco sues California over Waymo Expansion
Why are we not surprised to see this headline? At this point you can even say it’s comical. This is all about a power grab for data, tax revenue and the ultimate control of a new emerging technology. Could you image if San Fransisco sued every major automaker to ban driving in the city because humans are poor drivers? There would be a national outrage about the unconstitutional overreach over power.
But yet, with autonomous vehicles it’s OK because special interests are spinning a false narrative that autonomous vehicles are “unsafe”, “cause problems”, “kills jobs” and are all around “bad”.
What’s bad is misleading the public. Misleading the public leads to the erosion of trust around one of the single most important technology developments in our lifetime — autonomous vehicles. Autonomous vehicles are good for the economy. Autonomous vehicles will create jobs. Autonomous vehicles will make the roads safer. Yet certain elected officials are determined to rewrite history.
Our take: It’s time to be honest. Misleading the public and filling frivolous lawsuits is only going to further increase mistrust of autonomous vehicles, leading to a further decline in San Fransisco’s already struggling economy.
Waymo parent Alphabet is a The Road to Autonomy Index component company
Autonomous Open-Pit Gold Mining in Canada
IAMGOLD, a Canadian gold producer has developed the Côté Gold project near Gogama, Ontario, Canada from the ground-up for autonomous trucks.
The whole mine site has been designed around autonomous [vehicles], and that’s going to make the ultimate operation that much more efficient.
– Graeme Jennings, IAMGOLD, VP of Investor Relations as told to the CBC in a phone interview
At peak capacity, 23 autonomous Caterpillar trucks will be in operation hauling 30,000 tonnes of ore every day.
Our take: Autonomy at mines will increase efficiency, operational profits and create jobs.
Caterpillar Inc. 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 January 22, 2024, The Road to Autonomy Index returned 0.37%, the S&P 500 returned 0.50% and the NASDAQ 100 returned 0.15%. The Road to Autonomy Index underperformed by the S&P 500 by 0.13% and outperformed the NASDAQ 100 by 0.22%.
The top performing stocks in The Road to Autonomy Index this week were:
- Aptiv returned 8.91%
- The Goodyear Tire & Rubber Company returned 7.47%
- Berkshire Hathaway Inc. (B Shares) returned 5.02%
S&P Dow Jones Indices is the custom calculation agent for The Road to Autonomy Index
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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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May Mobility investor Toyota is a The Road to Autonomy Index component company
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Daimler Truck AG is a The Road to Autonomy Index component company
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A weekly newsletter featuring insight and analysis on the autonomy economy™ and how the financial markets are viewing its emergence.
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