Key Points
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Alphabet’s autonomous vehicles are a common sight now in several major U.S. cities, such as Los Angeles.
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Interestingly, some don’t immediately identify this next-generation vehicle developer as an auto company.
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As with nearly everything associated with Tesla and its colorful CEO Elon Musk, the hype around the company’s Robotaxi project has been considerable. He envisions a future where the autonomous driving technology powering the Robotaxi fleet becomes the monster revenue-producing engine of the electric vehicle (EV) king’s business.
While I think one company has a decent shot at carving out a huge chunk of the self-driving taxi market, it isn’t Tesla. In fact, it’s an enterprise that most people don’t readily associate with automobiles at all.
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Miles ahead
That company is Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) known by billions as the owner of Google, the No. 1 internet search engine. For years, it’s channeled some of the vast amounts of revenue it earns from search (and far smaller income streams) into other ventures. Its autonomous taxi effort, Waymo, is a directly owned subsidiary.
With management’s considerable support and gobs of capital, Waymos have become advanced enough to be common sights in several U.S. cities (most notably throughout my auto-dependent home of Los Angeles). Approval is coming soon for several other cities, namely San Diego, Las Vegas, Denver, and Tampa.
First-mover advantage matters in both the tech and automotive worlds, and that especially applies at the intersection of the two. Waymo is actively providing service and earning revenue from it; what’s more, it’s clearly becoming a go-to choice for rideshare customers. At times, when I’ve been out on the town, I’ve either been told directly by people or overheard someone saying they’re ordering a Waymo — and not, pointedly, an Uber Technologies or Lyft.
The regulatory challenge
And certainly not a Robotaxi. Tesla’s pet rideshare project is live and operating, but only in limited areas of Texas cities Austin, Dallas, and Houston, and Florida’s Miami, Orlando, and Tampa. It’s currently being piloted or tested in the San Francisco Bay Area, Phoenix, and Las Vegas.
I should point out here that one challenge any self-driving taxi project will face is the patchwork of regulations in the U.S. After all, the federal government hasn’t yet established a nationwide legal framework for autonomous driving systems. In this vacuum, certain states, like Texas, are known to be relatively flexible — this helps explain Robotaxi’s early deployment there.
But I think that project faces a longer road to widespread approval than Waymo. Tesla has a safety record that is hardly impeccable, and that surely makes regulators pause to think.
Also, Waymo has technology that many consider superior — its cars use a multitude of sensors, including state-of-the-art LiDAR and radar, which together interpret driving situations in great detail. Tesla’s Robotaxi cars rely entirely on cameras, which some transportation authorities (or, crucially, customers) might not consider sufficient.
To me, Alphabet’s approach with Waymo is to build the technology deliberately and carefully, to the point where it is generally safe and reliable on the road. My impression of Tesla is more of a “let’s build it, then we’ll adjust as necessary.” That can work brilliantly for smartphones or software, but I feel it’s potentially quite risky for autonomous cars roaming public streets.
That, plus Waymo’s already-impressive head start in the autonomous taxi market, makes Alphabet’s project a much better bet to dominate it, in my view. In fact, I think Waymo is already the early winner and has a fine chance to maintain or expand that status.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Lyft, and Tesla. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.
