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Today, Google (GOOG) dominates online search and makes a lot of money from advertisers that pay to appear alongside search results. However, in the future, I think there's a good chance that a very different product line may become Google's main business. That product line will be the world's first fully-automated passenger and commercial vehicles.

Google has been working on this technology for some time, and a recently-released video shows just how far it has already progressed. The video's description states that Google's driverless cars have now covered 200,000 miles, which demonstrates Google's commitment to the project and indicates that the technology is likely very advanced because of the extensive research and testing. A New York Times article states that, as of 2010, over 1,000 miles had been driven with absolutely no human intervention.

While there have been no announcements of imminent commercialization, to me, it's clear that this technology will be ready for sale in the not-too-distant future. There are no apparent challengers to this technology that are even close to being as sophisticated and heavily tested.

Therefore, when commercialized, Google's first-mover advantage may translate into more than just sales - they may help set the standards and laws for all future driverless vehicles. This isn't inherently bad or evil, but it may allow Google to maintain advantages over potential competitors if certain tough-to-meet standards or requirements are adopted. It will be interesting to watch developments in Nevada, which has acknowledged that there will be a need to regulate driverless cars in the future.

Once commercialized, the driverless car has the potential to completely transform Google's business. In 2011, Google had $38 billion in sales. I think that the driverless vehicle could become a business that could produce anywhere from 2- to 25-times as much revenue.

In 2011, there were about 78 million vehicles sold throughout the world. In the future, it's probably safe to assume that a run-rate of 100 million is possible; less than 60 million were sold in 2000, and emerging market demand is likely to drive sales increases, despite slower growth or stagnation in the developed world. Obviously, at first, not every car would contain driverless technology; it would be too expensive for many developing-world vehicles, and necessary mapping data may not exist for such places.

However, I think that it's reasonable to assume that Google technology could eventually penetrate at least 10% of the vehicle market (or 10 million vehicles). Quantified differently, 10 million is approximately the annual sales total of cars in the United States, or a significant minority (25%) of passenger vehicles sold throughout North America, Europe, and developed Asia.

I think it is also reasonable that Google could sell the technology to an automaker for $10,000 per vehicle. That would result in $100 billion in revenue per year, or more than twice Google's current annual revenue. If Google decided to actually produce its own car (which should be possible due to Google's deep resources and the possibility of partnering with a traditional automaker like GM (GM) or Toyota (TM)), revenue could be closer to $50,000 per vehicle or $500 billion per year. If consumers and governments embraced the automatic automobile and Google captured 20% of the worldwide market, the Google Car could be a $1 trillion business.

Obviously, those are very back-of-the-envelope calculations, but I don't think they are unreasonable. In fact, I think that it could be a gross underestimation. Once the technology has been proven, I think that consumers, companies and regulatory bodies will embrace it - or even mandate it.

If every car on the road was driverless, safety would be improved and many efficiencies would be realized. Traffic flow rates could be increased, as vehicles communicating with each other could operate with less margin for error than is necessary when humans are behind the wheel. Commercial vehicles could be automatically piloted during off-hours, when less vehicles are sharing the road (and potentially, speeds could be increased).

First-world cities (like my home, New York) might rush to mandate the technology to ease congestion, while also improving many other aspects of transportation; imagine ordering a taxi via smartphone (or other futuristic device) and having an automated automobile quickly pull up to your location and deliver you to your destination. Eventually, the car itself would change; much of a current car exists to protect passengers during a crash, but if crashes no longer exist, the automobile could be reengineered to be smaller, lighter and more efficient.

I believe that the commercialization of Google's electric car technology is imminent, but even if you do not agree, it's hard to ignore Google's general spirit of innovation, seen everywhere from April Fools jokes to free products like Analytics to a rumored space elevator, which is one of dozens (or hundreds) of pet projects being worked on in secrecy. Such efforts have not yet paid off for shareholders; Google shares trade around $650 today after breaching $700 in 2007. But the future payoff could be enormous. Google turned one technological advancement - a better search engine - into its current business. Now, it's working on hundreds of potentially society-changing and profit-making endeavors.

I don't own Google shares yet, but will be looking to invest in the company in the near future. Current valuation metrics are reasonable; shares have a P/E of roughly 20, which fairly values the still-growing search and advertising business (and related offshoots, like Android devices). Any commercialization of seemingly-farfetched products like the Google Car are (understandably) not reflected in the share price, despite the (uncertain) potential for enormous future success.

Also, it's just exciting to believe in and be a part of what Google is doing. Apple (AAPL) can make a lot of money by selling a barely-better New iPad to the same people who bought an iPad 2, but Google is trying to truly change and improve the world. Apple's strategy has been much more lucrative for shareholders in recent years, but Google's strategy has much greater long-term potential - and more important long-term implications.

Source: Google, The Automaker?