The concept of hitching a ride in a robotaxi is no longer science fiction, with some big hitters racing to dominate this next phase of transport.
With the auto manufacturing market already worth around £3trn annually, investors see autonomous vehicles (AVs) as a market disruptor, transforming sectors such as delivery, logistics, auto-related finance and insurance.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: “As the market evolves, there are questions about who will emerge as the leaders in this new paradigm and how existing players like Uber will adapt to maintain their relevance.”
Britzman thinks there are three standout stock picks in the autonomous driving space: Tesla, Waymo and Uber. Below, we take a closer look at each.
Waymo – for the city dwellers
A subsidiary of big tech behemoth Alphabet, Waymo was the first western company to roll out a commercial robotaxi service based in cities. It was last valued at more than $45bn.
Nowadays, it’s delivering over 250,000 paid rides per week in select US cities.
Waymo partners with existing car manufacturers – like Jaguar – to buy vehicles in bulk. The tech hardware Waymo then installs is pricey, Britzman warned, with some estimates suggesting it adds up to $100,000 on top of the vehicle cost.
“Waymo’s latest generation of technology is said to be much cheaper, how much so we don’t know yet,” he said. “It’s safe to assume for now that it’s still significantly more expensive than companies like Tesla and some Chinese competitors can build at.”
Tesla – the software edge
Tesla has finally made its move into the AV market with the launch of its robotaxi service in Austin, Texas, which involves up to 20 Tesla Model Y electric.
They are steered by Tesla’s Full Self-Driving software, with founder Elon Musk claiming ride costs will have a flat fee of $4.20.
Sam Korus, director of research on autonomous technology and robotics at ARK Invest, said: “The launching of the robotaxis is a fundamental business model shift for Tesla. Our research suggests that [the Tesla model] makes up close to 90% of the forecasted enterprise value.”
Without Light Detection and Ranging (LIDAR) technology and other “unnecessary” hardware, Korus said Tesla’s cost per mile could be 30-40% lower than Waymo’s, “thanks to its vertically integrated manufacturing”.
Tesla may be comparatively late to the AV space, but it also has the benefit of millions of vehicles already on the road which can be upgraded with autonomy via software.
“Any [Tesla] built in the past few years have the potential to become a self-driving taxi with just a software update,” Britzman said. “That kind of head start could give Tesla a major edge over the competition, assuming it can roll out its driverless tech more broadly.”
However, Britzman also highlighted safety-related risks raised by Tesla’s decision to forego the LIDAR sensors, instead relying solely on camera-based vision.
“But if Tesla can prove its system is safe and reliable, it has a real shot at shaking up the industry – making self-driving ride-hailing both widely available and financially sustainable,” he said.
It is worth noting that, in recent weeks, Tesla has pushed for the rejection of a request for access to some of its vehicle crash data held by the US National Highway Transportation Safety Administration.
Uber – sheer scale
Uber is making use of its existing scale, which amounts to some 170 million active monthly users, by positioning itself as a platform for AV fleet operators pursuing higher utilisation rates, rather than owning or manufacturing vehicles itself.
“This supports its current asset-light business model, which connects drivers and riders without owning any vehicles,” Britzman said, pointing to Waymo AVs operating out of Austin in the US as an example.
Still, Uber’s future hinges on how the market evolves.
“If [companies currently working with Uber] fully control their customer interfaces (apps) and the technology, Uber could lose autonomous ride market share and face intense pricing pressure, undermining its commission-based revenue model,” Britzman said.
Uber’s more diversified business model – which expands to food delivery – does provide some insulation.
“But looking further afield, we think there’s reason to be cautious about the outlook,” said Britzman. “If one or two players end up dominating the autonomous market, then it’s not obvious how much value Uber would be able to add.”