It’s been a crazy week for the autonomous driving industry, which is central to my investment thesis in $Mobileye Global Inc.(MBLY)$ $Lyft, Inc.(LYFT)$ $Uber(UBER)$, and to a lesser extent $Alphabet(GOOG)$ $Alphabet(GOOGL)$ where Waymo is pure upside.
Waymo, which is completing over 250,000 commercial rides per week, is the clear leader today, and everyone else is trying to build a business model that will stand the test of time. But there are a lot of questions to answer.
Will $Tesla Motors(TSLA)$ launch in June in Austin? If they do, what will that look like?
Are $General Motors(GM)$ , $Volkswagen AG(VLKPF)$ , and others going to launch “hands-off, eyes-off” options on vehicles by the end of the decade?
Will Zoox, Mobileye, May Mobility, and others launch on Uber and Lyft in the next few years?
There are starting to be some developments, so let’s update on where the companies involved stand.
Mobileye Making Deals
One of the biggest positions I have in autonomy is Mobileye, the technology company behind most of the Level 1 autonomy systems today, which include smart cruise control and lane assist that you may have on your vehicle.
Mobileye’s advantage is its horizontal or modular business model, compared to the vertically integrated model that Waymo and Tesla are bringing to market. The company can develop technology once and sell it to dozens of automakers to install on millions of vehicles around the world.
This leverage on development is key to the business model. For example, Mobileye has shipped systems for 34 million vehicles over the past year while Tesla has delivered just 1.7 million vehicles (there are two y-axes on the chart below). Mobileye has 20x the leverage Tesla does based on this metric.
That’s why recently announced deals are great news, and they’re starting to pile up. These deals aren’t for a single chip, a single camera, and some software that costs ~$50, like today’s systems. Some of these are worth 10x or more, and that will drive long-term growth.
Volkswagen Picks Mobileye (again): VW, the biggest automaker in the world, has chosen Mobileye’s tech for Level 2+ systems on its MQB platform, which undergirds vehicles like the VW Atlas, Audi Q2, and VW Passat. Valeo will integrate other hardware, like cameras and radars, with Mobileye’s Surround ADAS software and EyeQ 6 High chips and mapping technologies.
“Global Automaker” Picks Mobileye for Imaging Radar: On Thursday, Mobileye announced its imaging radar was chosen by a “global automaker” for a Level 3 autonomous driving system at highway speeds.
We don’t know who the automaker is, but Level 3 is the point where the automaker becomes liable for what happens to a vehicle. It’s “hands-off, eyes-off”.
Not even Tesla is Level 3 today (more on that later).
On top of these developments, Mobileye is moving forward with vehicles that will operate on the Lyft and Uber networks in Dallas and L.A., respectively.
Mobileye is moving quickly to get deals lined up for launch in the next few years. It will take time to get Level 2+ to Level 4 vehicles to the road at scale, but a flood is coming, and I wouldn’t be surprised to see another deal or two in the coming months. Everyone needs an autonomy strategy, and Mobileye is the one company that can provide one out of the box.
Waymo Lays Out Expansion Plans
Waymo is the one company that’s operating autonomous vehicles on commercial roads at scale.
The question for Waymo is whether the company’s higher hardware costs will come down to a more reasonable level before lower-cost solutions (like Tesla’s) hit the road.
We don’t know a lot about their costs other than estimates that a vehicle is $100k-$150k today, and evidence we have that Waymo is scaling manufacturing through partnerships with Zeekr, Hyundai, and Magna, which is running a new production facility in Arizona for Waymo. The next generation vehicle is likely to be closer to $50,000, within shouting distance of a Model Y.
But it’s undeniable that Waymo’s service is safe. So, if the company can lower costs and scale, it could “win” the market before others even launch.
To that end, in 3 minutes on Tuesday, the company announced three more “road trips”, which are like test runs in new cities before a full launch a year or two later. In total, Waymo has done over a dozen road trips.
Waymo already operates in Phoenix, San Fancisco, Los Angeles, and Austin today with Austin and Miami coming within the next few months.
We could see Waymo operating in a dozen cities, or more, by the end of 2026. And the business would be pretty big at that point
In four cities, Waymo is doing 250,000 rides a week. Let’s say they get to a dozen cities next year. It’s possible Waymo will complete a million rides per week.
At a $20 price point per ride, Waymo would be on a $1 billion runrate and I don’t think it’s too much to assume the vehicle payback is only a year or two, at most based on what we know about Waymo’s operations.
Waymo has proven its safety record and now it’s time to scale the business. A recent blog post said they would more than double the fleet in the next year and I think that’s just the start of Waymo’s growth curve.
Tesla Robotaxis on June 12?
Elon Musk says Tesla will launch a Robotaxi service on June 12 in Austin, Texas. Today, Tesla is not a “known operator” of autonomous vehicles in Austin.
There’s a big leap for here to there. One that most companies have taken years to bridge. And Tesla wants to do it in a few days.
Meanwhile, you don’t have to look far to see FSD NOT performing safely enough to be on public roads without a safety driver.
Or you could watch the video of this accident while a driver was on FSD and see that the AI software halucinates from time to time, just like ChatGPT does. And it does so VERY confidently.
For Tesla, the rubber is hitting the road. The data we have available from crashes (not all of which are publicized) and the FSD Tracker (below) tell us that Tesla’s FSD is nowhere near as safe as Waymo or even Cruise was before it shut down. And while companies like Mobileye and May Mobility are doing years of testing with safety drivers, Tesla is going to get a few days with a safety driver before putting Robotaxis on the street?!?
If Robotaxis do launch in Austin on June 12 we will know relatively quickly whether the system is safe or not. Every accident will need to be reported to federal regulators and there’s no hiding behind “the driver was technically in control.”
I hope autonomy succeeds at scale for many companies, but it needs to do so safely.
I haven’t seen that record of safety for Tesla. We will soon find out if I’m wrong.
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