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Waymo Has A First-To-Market Advantage In Autonomous Ride Services

Mar. 02, 2020 11:22 AM ETAlphabet Inc. (GOOG), GOOGLAAPL, APTV, F, GM, LYFT, TSLA, UBER143 Comments
Michael McGrath profile picture
Michael McGrath


  • Autonomous vehicles will be launched within a year to provide autonomous ride services (ARS).
  • It now is clear that Waymo (Google) will be the first major company to bring this service to the market.
  • Waymo will have substantial first-to-market competitive advantages that will enable it to achieve significant market share in what is expected to be a very large new market.
  • The ARS market in the US is projected to be $100 billion by 2025 and more than $750 billion by 2030.
  • This has the potential of eventually valuing Waymo as a standalone business at as much or more than Google today.

I've been writing articles about autonomous vehicles on Seeking Alpha for almost two years, and I continue to believe that 2021 will be the year for the introduction of autonomous vehicles (AVs). It is now very clear that the first market opportunity for AVs will be Autonomous Ride Services (ARS) and not AVs sold at retail. It is now also clear that Waymo (NASDAQ:GOOG) (NASDAQ:GOOGL) will be the first to market and can establish substantial competitive advantages. In this article, I'll explain why ARS is coming within a year, refresh my projections of the ARS market, explain Waymo's strategy, highlight the strategies of potential competitors, and consider the significance of its first-to-market competitive advantages. First, let's review autonomous ride services and its market opportunity.

Autonomous Ride Services

Autonomous ride services is essentially Uber without a driver. It will be provided by fleets of autonomous vehicles based in selected metropolitan areas that offer trips to certain destinations along predefined routes. The autonomous driving technology used by these vehicles is based on LIDAR and high-definition maps that position the vehicle precisely on the map. Initially, the destinations and routes may be somewhat limited, but those will increase rapidly. A passenger will summon an autonomous ride using an app similar to Uber (UBER) or Lyft (LYFT), and the app will identify if that route is available.

The cost advantages of ARS over ridesharing are significant. In a previous article, I explained these cost differences: Uber Must Have Autonomous Ride Services. It's the classic case of a technology/capital-intensive business model replacing a labor-intensive one. Ridesharing companies like Uber and Lyft struggle to achieve breakeven on a typical trip at about $16, but ARS will be very profitable at about half that price.

Almost all companies developing autonomous vehicles have shifted their strategies to focus

This article was written by

Michael McGrath profile picture
Author of Autonomous Vehicles: Opportunities, Strategies, and Disruptions. Michael E. McGrath is a proven expert on the strategies of technology-based companies. He has researched autonomous vehicles for the last 3 years, leading to the original publication of this book, as well as the recently expanded and updated second edition. He is a founder of PRTM, the leading management consulting firm to technology companies, former CEO of i2Technologies and experienced board member, serving on four public company boards, as well as several venture capital-funded companies.  In addition to Autonomous Vehicles, he is the author of Product Strategy for High-Technology Companies, which has been used by many technology-based companies to guide their strategies.

Analyst’s Disclosure: I am/we are long GOOG, AAPL, GM. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (143)

I don't know the full details of how road maintenance is paid for in the US (I gather its a mixture of general taxation and fuel duty), but how will ARS profits being sent out of town at the expense of local drivers be seen by the locals? Not favourably I imagine. So will additional taxation will be added to make a level playing field, reducing their viability further ?
Michael McGrath profile picture
Good question. Much of it today comes from the gasoline tax, and that is already in jeopardy with electric vehicles. More municipalities are taxing Uber and Lyft now. I would expect that to continue with autonomous ride service vehicles. And it would be fair to do that. While such a tax may slow adoption a little, I don't expect it will change the viability.
About Regulatory interests and testing regimes that are coming faster than you can say "Hoi, Taxi!"

Moneyball @DKurac
Mar 10
#China to open its 1st #L4 autonomous driving testing facility in Chongqing, local media says.
180 km testing facility to be made by Baidu Apollo & local gov. It will be able to support >100 vehicle tests. Jun start, the equipment to be installed. Jul start, trial runs to start. twitter.com/...
"Offer trips to certain destinations along predetermined routes." Isn't that what a bus does and a lot cheaper?
Tdot profile picture
Pretty much, except the driver and steering wheel and door opening lever and such.

But yes, the current plans for the "first generation" AVs are mainly as taxi cabs and shuttle buses operating on carefully mapped and geofenced routes, in other words SAE Level 4 Autonomous.

SAE Level 5 is thought to be a decade away from full implementation and being "consumer ready", regardless of Musk's personal beliefs and hopes on the matter. Remember, Musk said in 2016 that Teslas would be be able to drive themselves from coast to coast with no human occupants, and deliver themselves to customers.

Ford and GM seem to be setting up for SAE Level 4 operations in 2021, with more and more "public" demonstrations coming in the next few to several months.

Meanwhile Teslas are still just trying to learn how to avoid hitting things and going off the paved road in semi-AutoPilot driver assist mode, and in the valet self-parking app that sort-of released late last year to much fanfare and laughter as the self-parking Teslas showed the maneuvering and parking skills of a 5 year old child trying to see over the dashboard while struggling to reach the brake pedal.
davel profile picture
Your timelines seem wildly aggressive from what I have read.

Waymo does not have first mover advantage. It does not possess a self driving car. What it possesses is a taxi service like what has been offered for 100 years.

Everyone seems to think waymo is so far ahead. Maybe they are. Maybe they publish data because they were spun off and need a story to tell. Google was first with google glasses. They rolled out google fiber, their cable service years ago. How are those initiatives doing? Google does a lot of stuff. Some very successful and others not.

Waymo ride service was offered about a year ago. As I understand it the service is essentially a taxi service like Uber and lyft. This has not changed.

You make projections of how many automated cars will be available. How much does each car cost? And with the limitations you impose will people choose this service or go with a comparable service that gets them to where they are going when they want? In short I question if it would be profitable in a few years and if the service companies would be comfortable with the capital risk they incur for a marginal improvement in one of the dimensions.
Michael McGrath profile picture
Some good questions. Waymo has developed the autonomous driving technology and it is putting that into 80,000 base vehicles that it acquired from Jaguar and Chrysler. It will use these to provide driverless taxi service with significantly better economics than Uber or lift because it eliminates the cost of the driver. Waymo has been testing/offering ride services like you said for more than a year. These have had a safety driver on board until now. This is a big difference. Autonomous ride services can be profitable at half the price of Uber, so people will begin to use it where available. If you are interested, I explain all of this with the economic models in my book -- Autonomous Vehicles: Opportunities, strategies, and Disruptions. Thank you.
davel profile picture
@Michael McGrath

As I understand it they have not acquired 80,000 vehicles. I see it as an order of intent. Let us say they “purchased” said cars. Where will they deploy them? That comes to laying out $4B for a fleet of cars they are not using if you assume each car costs $50k. That is a lot of coin to spend on vehicles that will sit in a garage. This of course does not include the additional technology they need to introduce to each vehicle to support autonomous driving.
@Michael McGrath @davel

"As I understand it they have not acquired 80,000 vehicles. .... laying out $4B for a fleet of cars they are not using if you assume each car costs $50k....does not include the additional technology they need"

Michael said elsewhere in comments they'll cost circa $100K each - $50K for the technology aspect - so it's $8 billion. Much much more than it costs to put a Licenced Taxi or Uber/Lyft car on the road. The Insurance will not be less than a Licenced Taxi is charged - specially because it is remotely Autonomous - unproven - with no driver on board.

3 million ARS vehicles spread across several operators Waymo, Telsa, Cruise Mobileye etc may cost operators a mere $300 Billion just to build them. Then comes the costs of creating an Uber like Rideshare IT system and administration.

Then they need to PAY THE ACCUMULATED COSTS (while making a massive loss at startup) to actively COMPETE for YEARS against with all the existing competition of Taxis and Rideshare and other Public/Private Transport providers who currently hold the 100% of Market.

@Michael McGrath "significantly better economics than Uber or lift because it eliminates the cost of the driver. "

They DO NOT eliminate all the costs carried by the Owners of rideshare vehicles. Drivers only get "paid" whatever is left over AFTER they provide the vehicle, operate it, repair it, insure it, get accident repairs done, replace tyres, pay govt licences and fees, iow pay all the costs involved in providing the service as a owner/driver PLUS operating the car.

The savings of driver Labour costs is minimal - maybe half at best the PITTANCE Uber pays the driver. Out of that payment then the owner needs to cover the Asset value loss from the 60K-100K miles per year -- a cost which is significantly higher than an Depreciation charge to their small business.

Most Taxis/Rideshare vehicles are worthless after 3 years full time on the road and handling paying Passengers!!!

By dumping the "owner/driver model" Waymo et al will be immediately picking up ALL the costs and chargers that Uber corp et al have NEVER had to pay in the first place.

Taxi driver who driver cars owned by the taxi business itself are paid ~40% of the fare. They can afford to do this because Fares are double Uber's rate!!!

A Taxi business is using much cheaper cars than an ARS network would.

IF Taxi drivers were unpaid slaves - and Taxis rates were what Uber charges - the Taxi Owners and Network Companies would go Bankrupt and shutdown within weeks!

Charging Fares Half the Price of Uber rideshare is not Viable - they'd be out of business on the first day - unless sitting on $BILLIONS of Investors CASH to BURN.

These "off the top of my head" estimates and claims and pronouncement DO NOT ADD UP for an ARS ride-sharing Business at all. The claims are ILLOGICAL and UNSUSTAINABLE on first Principles.

Unfortunately the Hyped Spin never stops - @Michael McGrath "This is a big difference. Autonomous ride services can be profitable at HALF THE PRICE of Uber "

THAT is living in fantasyland stuff without a shred of evidence provided to support the CLAIM. This is very poor form by an INVESTMENT ADVISOR Author on SA. @Michael McGrath you are not a 'throw away' anonymous commenter here.

Enough of the "read my book" excuse Michael - Please SHOW HOW an ARS Rideshare/Taxi service can set prices 50% BELOW UBER'S MILEAGE RATES and the OTHER Charges to customers and survive as business longer than a day.

Investors deserve nothing less than that - given the repeated claims and predictions about ARS Glory. TY

It's not asking too much either. It should be a GIVEN here by investment advisors and self-appointed "industry specialists" who have written books on the subject.

johnafish profile picture
I don't see it, the*only* advantage is there's no driver to pay yet the disadvantages and additional costs are significant, these include the extra cost of the vehicle, the higher cost of insurance, the likely higher cost of cleaning and repairing damage. The customer is inconvenienced by route and weather limitations and without a doubt these vehicles will encounter situations they can't deal with. So the customer must have an incentive to use the less capable driverless service which is another 'cost'.

I think whoever did the math on driverless cars is mistaken, I expect it'll be less profitable than other ride sharing service and that should worry investors.
Michael McGrath profile picture
I did the math in a previous Seeking Alpha article: seekingalpha.com/...

Basically for a typical $16 trip, Uber pays the driver $12.25 on average, including the use of his vehicle. The estimated cost of an autonomous vehicle including everything (depreciation, fuel, insurance, cleaning, and maintenance) is estimated at about $52,000 per year. For 30-50 trips a day over 250 days per year, the cost is about $2.50 - 3.00 per trip. So, it's much cheaper. Route and weather limitations will initially be managed by telling the customer it isn't available, so the customer will use Uber or Lyft instead for that trip. I forecast that the price for ARS will be about half the price for ridesharing and still be profitable.

I fully describe this in my book (Autonomous Vehicles: Opportunities, Strategies, and Disruptions). Three years ago, I was skeptical too, but then I did the research. It's basically technology and capital replacing a labor-intensive business model. That has proven successful in most cases historically. Thanks.
johnafish profile picture
I bet someone also calculated Uber's profits for their business plan. I wonder how that compares with reality.

I call nonsense on the whole robotaxi industry from a business perspective, technically interesting though.

Perhaps it'll make money with tourists as a novelty at a ridiculous price, a bit like Concorde did in it's later years.
@Michael McGrath " For 30-50 trips a day over 250 days per year, the cost is about $2.50 - 3.00 per trip. "

"I forecast that the price for ARS will be about half the price for ridesharing and still be profitable. "

Sorry that's simply BS fantasy.

You have the option to SHOW your work though. The devil is in the details.
04 Mar. 2020
What do you think about ground penetrating radar? Do you think this is how they will deal with snow?
Michael McGrath profile picture
It's still in the research stage now, but I think it's fascinating. Right now the practice is that AVs will drive like humans in the snow by looking for physical landmarks like trees, signs, etc. and then estimating where the road is, unless there are other cars or tracks to follow.

If ground-penetrating radar actually works, then it would be much more accurate than humans. From what I've seen so far though, there are still obstacles to making it work reliably. Thanks.
Tdot profile picture
Ford is using LiDAR and known (geomapped) roadside features to find the road in snowy conditions - media.ford.com/...

"LiDAR, on the other hand, is much more accurate than GPS – identifying the Fusion Hybrid’s lane location right down to the centimeter. LiDAR emits short pulses of laser light to precisely allow the vehicle to create a real-time, high-definition 3D image of what’s around it."

"An autonomous vehicle creates the maps while driving the test environment in favorable weather, with technologies automatically annotating features like traffic signs, trees and buildings. When the vehicle can’t see the ground, it detects above-ground landmarks to pinpoint itself on the map, and then subsequently uses the map to drive successfully in inclement conditions."
jeanchartman0587 profile picture
canon mx922 b200 error
daveruns2win profile picture
I think the market for these services can be segmented and different strategies will work better in different situations. For instance, owning an autonomous vehicle and sending it to pick up the kids after soccer practice, taking grandpa to the doctor, or simply meeting you at the airport on your return from a business trip makes a lot of sense for an individual owner. It also cuts into the common reasons that many people use current ride sharing services. I can also imagine a business owning a car to shuttle employees and visitors to airports, hotels, etc. Pizza restaurants may want to own their own cars for branding and quality control. I can also imagine new services, where you order online and send the car to pickup your stuff. I think the convenience of having your own autonomous car will be important in more affluent areas and suburban areas where parking is not an issue. But obviously this will not work as well in large cities with limited expensive parking. It is also not the most efficient use of the technology, but other benefits often trump cost.
Michael McGrath profile picture
Very perceptive. The market will be segmented like this. I cover all of those cases in my book -- Autonomous Vehicles: Opportunities, Strategies, and Disruptions.
03 Mar. 2020
Very thorough article on ARS, AV and Waymo...very informative, thanks.
Was wondering if you’ve done any research on Luminar and their LIDAR product?
Rob A
Michael McGrath profile picture

I haven't done very much research on specific Lidar products. Initially, I thought that Lidar would be provided by Luminar and other Lidar companies. But it now appears that many of the companies developing AVs are also developing their own Lidar since it is a critical technology.
Tdot profile picture
It isn't so much that they are "developing their own LIDAR", it is more that they are developing their own ways of integrating LIDAR into their AV designs so they don't look so much like spinning soup cans sprouting from the roof like some kind of weird parasitic fungus.
Lois, have you already read and absorbed (or even know about) this Dutch Safety Board Report on ADAS and autonomy from Nov 2019?
Who is in control? www.onderzoeksraad.nl/...

Using technology to improve safety of road suers is a great idea . But it has it's limitations too. Corporate driven Hyped PR does not amount to genuine facts nor evidence of a social good.

But who is going to pay for the "Black Boxes" that can withstand a Tesla battery fire being placed in every single Robotaxi vehicle ... and the resources to analyses the data every time there's an accident injury or death involved? And what about the Govt approved tamper proof video recording installed internally of each and every vehicle? That's not cheap either.

I've checked into Google scholar since 3 years ago, and am yet to find a single Paper that supports the need for and viability of autonomous vehicles and robotaxi services now or in the medium future. I know how to navigate that domain and even though I am not going to pay $30-$60 each to read the subscription papers I'm aware enough of how to parse what the overall consensus conclusions are thus far by objective credible academics and scientists. doing proper research and analysis of the issues involved at all kind of levels.

The overall message I get from these experts is that FSD Autonomy and Robotaxis are an impractical unviable expensive solution looking for a problem that doesn't even exist.

But what I really want to know is what happens to the drunk client who falls dead asleep in the back seat of the Robotaxi once they arrive home in the middle of now where after they projectile vomit all mover the interior? Sure charge them to clean it up but who gets them out of that car? (smile)
03 Mar. 2020
None of your objections are related to autonomy. They’re about ride sharing in general and electric cars in general.
The article is about "autonomous-ride-services" the later "market" issues etc etc can't be excluded from the conversation.

My comments are very much directly related to Autonomous Driving (claims assertions and disinformation) in general and specifically.

You must have missed those parts above and down here seekingalpha.com/...
It isn't fair to compare autonomous vehicles or TESLA batteries to perfection. AV will be safer than taking an Uber and TESLA's are the safest car on the road.
S_Archer profile picture
@Michael McGrath
How much does a L4 car cost today and next year?
Michael McGrath profile picture
I use an estimate of $100K in my book (Autonomous Vehicles: Opportunities, Strategies, and Disruptions). Roughly, this is a high-end base vehicle at $50K (one with ADAS and other similar features removed because the autonomous systems replace these) and another $50K for the autonomous system. These costs will continue to go down, but in the economic model of ARS, it doesn't matter that much since the utilization rates are so high. It's more profitable to have a $100K vehicle used 50% of the time than a $60K vehicle used 5% of the time.
@Michael McGrath
Your point on the relation between profitability and utilization rate is a point many miss. Ride share vehicles will have a high use rate - they're not sitting in a garage or parking lot - they're out making money, mile after mile. And for electric vehicles, the maintenance costs are significantly less than an internal combustion engine. They're rolling money machines....
I use an estimate
the economic model of ARS,
since the utilization rates are so high

Credible Objective Peer-Reviewed Evidence?

I guess I'll have to read the book. :)
No mention of Mobileye ARS in China in 2021?

"Ridesharing companies like Uber and Lyft struggle to achieve breakeven on a typical trip at about $16"

They don't own a single vehicle nor a Smart Phone themselves - and they still cannot make a profit running an in-house basic remote IT APP system?

Their ONLY cost is their OWN Administration - that's it - and they are miles from making a profit. In many countries they are banned and will likely remain banned. ARS systems as well.

They don't pay for a vehicles running costs nor registration, don't pay for Smartphone or connectivity, or pay the driver licensing fees and the car insurance of the cars. The drivers own them (pay everything) and/or use cheapest rental/lease options packaged for Rideshare drivers.

If a 'full time' Driver's use their own vehicle the daily mileage is rapidly destroying their vehicle's asset value to next to zero in 3 years if they drive full time. They are being paid next to nothing (min. wage) per hour and mainly living off the $$$ paid by Uber which does not compensate them for the destruction of their Assets (or their payments to the Car Hire service) and the annual running costs PLUS their IncomeTax and GST/Sales Taxes.

Let alone their Labor Time during and outside their driving time..

Suddenly Waymo, Uber Lyft and Tesla are going to be able to OWN their own cars, pay for their running costs, Govt regulations fees, and make a profit on an average $16 a user trip?

While driving around (on average likely) 1000 miles for every 300 miles paid for by a customer? And they've been saying that will offer even cheaper fares to Rideshare users than they are at already - much much cheaper than a regular taxi per trip.

I believe these "business income/profit models" and marketing analysis are primarily based on extremely biased Theories - their assumptions are seriously flawed - imo - all being absolutely best case scenarios that totally unrealistic long term. But we'll see.

You can be an Uber driver in a $20K car. In India and elsewhere it's a $5K car.

ARS are going to make $100 Billion in Revenue in 2025 deploying 'remote controlled' IT APP systems running Autonomously equipped $50K to $80K 100% BEV vehicles and suddenly make a Profit and Compete with on price, service, efficiency, speed and safety of human drivers in taxis, rideshare and hire cars - in their dreams maybe.
Louis Stevens profile picture

You lack the fundamental understanding as to how these companies plan to govern the self-driving network.

No company in their right mind would field a fleet and expect to profit from it.

Uber does not plan to, nor does Tesla. I don't know what Alphabet will do, but no one should be buying Alphabet for self-driving.
Yes but I know 1+1 still equals 2.

And that follows that fundamental truth.

Feel free to fill me and billions of others on this planet about "how these companies plan to govern the self-driving network."

Because at present it's the world's most closely held secret. And what I have seen make absolutely no logical sense whatsoever.

The information in the article is (imho) a word salad festival that goes round in circles but says so very little of substance.

Follow this thought: Person A pushes phone APP button to order ARS transportation from A to B.

APP central finds closest ARS vehicle and directs it to the Customer.

Customer waits and watches progress and notes wait time before ARS vehicle arrives.

Vehcile arrives (eventually) person get in and ARS system drives ever so slowly to Destination B and stop ) somewhere.

Person get's out.

ARS IT APP System Charges fees to customers credit card.

Now tell me again HOW and HOW MUCH this ARS entity makes per Trip in Profit?

Uber and Lyft and OLA make multiples of $X in Losses and will for eyars ahead.

Until by some "AI miracle" ARS comes along costing I don't know $100 Billion $200 Billion or more in R&D (to be recovered in the next decade out of *Future Profits*) even before they have one car on the road and this *saves" all these currently broke and indebted Ride-share companies (and the dozens of NEW ARS ones claimed to be appearing any moment now) all becasue they OWN their own ARS vehicles in the MILLIONS and don;t have to pay a "driver".

A driver who really doesn't actually get even PAID PROPERLY or FAIRLY for the Services they provide and the Risks they take all on their own.

OK .. now shoot.

I'm all ears. Seriously. Help me understand this "brave new world" that at present only exists as a Theory in people's "minds" and whiuch they to date have been unable to explain to anyone adequately except using "metaphors" such as

*it's cheaper - better - safer - without a driver*
Louis Stevens profile picture

It's not a closely held secret at all... Watch interviews with Dara (Uber's CEO).

He clearly explains simply how they will roll it out. Literally in like two sentences.
Basic management:

--> It is only an advantage if it is accompanied by other REAL competitive advantages such as
1) Economies of scale that can't be replicated via just having a ton of capital (Such as REAL network effects like Facebook/social media for example)
2) High switching costs
3) Highly differentiated products.

The first mover spends an enormous amount of capital and TIME to be the first to market that must inherently be made up once it gets to scale. The second/third movers face a FRACTION of the upfront costs because they just copy the new model.
Michael McGrath profile picture
I agree with you in general. In Waymo's case, it will be able to achieve the first two and maybe the third. Also, in this market, unlike many others, competitors can't just copy the product. They will need to develop their own software and gain their own experience to prove it works safely.
Microcap Growth Investor profile picture
Interesting to see Waymo raise $2.25B today from a group of non-strategic investors, like Silverlake and Canada Pension Fund. Maybe some strategics are still coming, but on its face, seems weird, given their huge cash hoard of over $110B in net cash at Google.
Louis Stevens profile picture
@Microcap Growth Investor

It's likely to ensure incentives are properly structured.
Michael McGrath profile picture
Yes, that was announced after my article, and it illustrates that fleet-based autonomous ride services will be capital intensive. A fleet of 5,000 AVs will cost more than a half a billion dollars. An eventual fleet of 1 million AVs could require a $100 billion investment. To me, Waymo taking on outside investors indicates that it is getting ready to build and launch its fleet. Waymo also indicated in its announcement that it may do an IPO at some time in the future. Google has a lot of cash but may not want to use a significant portion of it. Most likely it has done the numbers on capital investment and sees how much will be required.
Microcap Growth Investor profile picture
@Michael McGrath ,

Good article! A couple comments.

I realize that AV's are going to be very expensive, but 1m AVs at a cost $100B seems too high of a forecast? That would be $1m per unit, which would prohibit an ROI *IF* your revenue projection of $150k annually per unit doesn't pan out OR if profit margins aren't at least 15%-20%. Both of which seem high for Ride-sharing-given how competitive it will be. Its likely that competitors will drive margins down in ride-sharing (at least initially in the first 5 yrs or so).

Also, note: At Cruise's AV day when they showed off their new Cruise Origin AV (about two weeks ago) GM/Cruise said the Origin (including electric motors and batteries) would cost between $40,000- $50,000 per copy when produced at scale. Now, I realize that doesn't include the SDS software, data centers (since they will all be connected), and lidar etc... but these costs will go down at scale.

Additionally, although they are spending small fortunes on AV's (example Ford has committed over $4B by 2023) none of the OEM's have anywhere close to $100B to invest in AV's. Even if AV's start throwing off cash to reinvest to get scale, $100B for 1m AV's seems too high. We'll see...

Ps. My comment above was that it was interesting that Waymo ISN'T getting any strategic investors (OEM partners) as investors.... That is a small red flag for me. Why isn't Fiat Chrysler, Renault/Nissan or Tata (Jag) investing? They are all supplying Waymo with vehicles and are partners with Waymo. I think it likely means the OEMs are keeping their options open. The OEM's will just be supplying the "dumb" vehicles to Waymo that inserts the "brain" (SDS) and runs the high margin service. Waymo is positioned to capitalize on the most lucrative parts of the mobility stack and their OEM partners will be squeezed into the lowest value piece - supplying a vehicle. Why should the OEMs stick with Waymo given AVs will likely begin to cannabalize their existing business? In other words, OEMs that partner with WAYMO may limit their downside somewhat as the industry gets disrupted, but they won't really participate in much upside in the biggest opportunity to OEMs since the advent of the car!
Risk Advisor profile picture

With respect to Ford, who books the revenue and profits, Ford or Argo Al, (in which VW is also invested)? Does Ford just profit as a percent of its investment in Argo Al? In other words to what extent does it have control? Or is it similar to its joint ventures around the world such as China where Ford books only 50% and the Chinese book 50%?
S_Archer profile picture
So you are saying that there will be 30K Level 5 (no driver) cars on the road next year?

And there will be $4B in revenue from these NO DRIVER cars in 2021

and $100B in revenue from this in 2025


I assume you are off by a factor of 10,000 or 100 years.
Michael McGrath profile picture
These are Level 4, not Level 5. Level 4 enables the vehicle to drive itself under limited conditions such as geo-fencing. This enables autonomous ride services. Level 5, as you imply, is much further away.
S_Archer profile picture
L4 .... got it.
so $4B from L4 driverless cars in 2021? 30K L4 cars in 2021

there will not be 3000 L4 cars on the road as driverless rideshares in 2021.

How many L4 Driverless cars do you think are working as robotaxis today?
petjumper profile picture
Geo-fencing doesn't help to get to level 4 in cities. Sorry, but your entire reasoning is built on incorrect assumptions about the technology involved and the massive problems, even Waymo is still not able to solve as to inner city traffic.
Back to square one, please!
I try to follow the topic, but I may have missed a few announcements....

When did GM say deployment in 2021? Last year, they said deployment in 2019, then postponed indefinitely, with recurring statements that things are going well, but I've seen no deployment update. I have seen statements that GM is in negotiations with the NHTSA on deployment/regulations specifics. I've seen no statement that Waymo is in similar/serous negotiations with the NHTSA.

GM spinning off their system is, as far as I know, sheer speculation. To my knowledge GM has not made any statements on the subject. To me, there is an excellent case to keep Cruise "in-house" to seamlessly integrate (insofar as possible) design, manufacture, and maintenance. This integration is a potential/probable competitive advantage for GM.

GM will be promoting their own driver assist system (Super-Cruise), in tandem with deployment of Super Cruise. And increased electric vehicles. In 2-3 years, GM will be a very different company.

Don't forget trucks - big money in long-haul autonomous truck transport - UPS, USPS, Walmart, Amazon, others, will be eager to save labor costs on highway trucking. And electric trucks, too. Big money for GM to offer driverless electric trucks.

To say Waymo has a first to market advantage assumes they will be first to market (evidence of that??), and then the question of scale - first to market in Scottsdale, or in several major US cities? We'll see.
Michael McGrath profile picture
Good questions/comments. GM has already given up much of the equity in Cruise by selling equity for more than $5 billion to SoftBank and Honda. Super Cruise is a very good semi-autonomous system. The NHTSA issue involves the elimination of the steering wheel and other driver controls, which GM is asking for. The NHTSA doesn't have jurisdiction over the need for a driver in a car. Those are state-level issues. Waymo's AVs have steering wheels, they just aren't used. GM did delay from 2019 but has implied 2020. I believe that its more like 2021. This isn't contingent on the NHTSA ruling. Yes, you are correct that trucking is a big opportunity. I cover those also in my book -- Autonomous Vehicles: Opportunities, Strategies, and Disruptions. Regarding Waymo being first, I tried to describe the reasons for that in this article, so I won't repeat them.
Double lol. I work in autonomous vehicles. The tech is SO far from being ready to replace human-driven vehicles as a door-to-door taxi service. Impressive safety records author mentions conveniently forget the fact that THERE IS STILL A SAFTEY DRIVER IN THE CAR. AV companies publish reports of how many 'disengagements' they experience per mile driven, but companies define 'disengagement' themselves--so its not clear that if the safety driver touches the brakes and or massages the steering to avoid an accident or make a maneuver smoother that this would ever be reported. Plus there is the problem that no one seems to understand that taxi / uber / lyft drivers do more than just drive! There are all kinds of customer service functions that need to be figured out, and in the near term these services are going to be slow, buggy, and annoying.
Very interesting article. How quickly do you think Waymo can have an ARS ready to go after placing an order with the car manufacturer verses Cruise? Say everything is going well for Waymo and they decide on expanding to Chicago How long will it take them to be operational in Chicago? Thanks
Michael McGrath profile picture
The orders were made a while ago, but the delivery schedule is dependent on the capacity of the Waymo factory to do the retrofitting of autonomous driving technology. I takes a while, maybe 6 months do complete the detailed maps for each new metropolitan area. But I don't think Chicago will be a priority for the next 3-5 years because of weather and difficult road systems.
S_Archer profile picture
The factories are not the limiter. the limiter is the fact that it doesn't work without a driver. this after years of work in Chandler.
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