A (2:48)

John, are we at the point where they're building an insurmountable lead? And as they deploy more vehicles, as they reduce their costs. We'll talk about the cost side in just a second because that is important. But is this something where somebody else can catch up or a number of other companies can catch up, or are they that far ahead?

C (3:03)

No, I don't believe that the lead is insurmountable. Travis, I really wanted to push back on you on the premise of the question in the first place, whether or not they had a lead.

A (3:13)

Oh, man.

C (3:14)

Right. But as I researched the show, it's pretty undeniable that Waymo does have a lead here. I think that all the stats do point to that. I think you make a really hard case that Waymox would not be in the lead. I think it is. But I would push back on the significance of being in the lead at this stage of the game. The stats that I saw, less than 1% of the population has even taken a ride in a driverless taxi at this point in the US So according to the law of diffusion of technology, we're still in the early adopter phase. So that means that companies such as Tesla, Uber, even Amazon, with Zoox, they all still have plenty of time to catch up before we get to the early majority phase of adoption. I think that's where a lead really matters, is in that stage of the game. Right now, we're still really early. There is time to catch up.

A (4:00)

Let's get to that. I think what you're alluding to with Tesla particularly is the cost side of things and then scale. They could potentially flip a switch, essentially update their vehicles and be fully autonomous for hundreds of thousands of vehicles in the US and the pushback on Waymo has always been their vehicles are too expensive. The estimates at least a couple of years ago was they were $250,000. That's probably lower now. I've seen more recent estimates that it's more like 150, maybe even a hundred thousand after they built out this facility. I think it's in Arizona. They also are now testing Zeekr Vehicles, that's a Chinese manufacturer making a custom made vehicle for Waymo that has been now seen on the roads in San Diego. But Tesla answered the cost question first, but has not answered the tech question. Are they going to be safe enough to actually pull that safety driver and not have accidents? Waymo took the opposite approach, answering the tech question, the safety question, and then the cost question will come later. So, John, is that going to ultimately be the right answer or is that just too much? That's to be determined from a cost side.

C (5:05)

I mean, what do I know? Travis, there are some really smart people on both sides of this argument. I think you can make a good case for either approach. What I will say is this. I do think that fast scaling solutions will matter in this space, because no matter who you are, I think that we have agreement that this market, that the autonomous taxi space will scale incredibly fast. It will be adopted really fast once it starts gaining some momentum. Just one statistic. According to Fortune Business Insights, the US market for this is supposed to go from 1 billion in 2022 to. To over 100 billion in 2031. Will that be exactly correct? Probably not. But will it be directionally correct? Most likely. And so a fast scaling solution will matter. It does seem like this could favor Tesla, but I wouldn't count out Waymo's ability to drive down cost either.

A (5:57)

Rachel, what do you think? Would you rather answer the safety question first and then say, you know what, we'll figure out costs later? You mentioned all these sensors that they have. We could potentially get to the point where you just take a bunch of those out. This is kind of the way I have an engineering background. If you're building a plane, right, you want to have zero failures in your plane and say, I'll take some cost out later, rather than saying, we got a really cheap plane, but it crashes every once in a while.

B (6:20)

But hey, it didn't cost us too much, right? Yeah, I think you made the point perfectly, Travis, because that's the approach Waymo has taken. And I think it has been incredibly effective. You know, they have really prioritized developing the most advanced and safest technology, first aiming for level four and five autonomy. And that really means you're focusing on robust systems that are designed for a commercial ride. Hailing service or safety is paramount. And then costs can be amortized over a fleet rather than individual buyers, at least initially. And the bet there is that once the technology is proven, mass production will naturally bring costs down. If you reverse the strategy there, you can very Much end up in a situation where there are key safety concerns which inflate your costs over time anyway. And I think that's been one of the problems we've seen with Tesla's approach. I'm not saying that they can't win in the game eventually. And it's worth noting, Waymo does have an advantage for a few reasons. It originated right from Google's self driving project almost two decades ago. There's that advantage of being a part of, you know, the Alphabet family. But I think a lot of it goes back to their approach. And even though Tesla has really said, look, we want to prioritize getting the technology into consumers hands at a lower price point using that cost first tech incremental strategy, so far that approach isn't really bearing out. I mean, we've been hearing the promises of what Tesla's technology is going to be, where it pertains to autonomous vehicles for over a decade and so far it's been a very slow journey. Can they catch up? Absolutely. But I think there's a lot still to be proven out, you know, which approach is most successful. But right now Waymo seems to be the winner here.

A (7:57)

John, I want to know if you think this is a turning point and what really brought on this discussion for me. I live in the Minneapolis area, but these are the announcements that they made for where they're at least starting to do their safety tests, they're starting to do their mapping. Kind of the progression here is that they'll go into a city, do a bunch of mapping, kind of confirm that all their systems work and then a number of months later you actually launch a commercial operation. That time has started to compress from when they first go to Citi, to what they call a road trip, to when they actually bring commercial vehicles to market. But these are their announcements of where they're going just in the month of November. Detroit, San Diego, Las Vegas, Tampa, New Orleans and Minneapolis. Seattle's another one of the cities they have on the list. They're now moving north into areas where, look, it snowed this morning in Minneapolis. There are waymos on the road in downtown Minneapolis right now as we're recording. That seems like they're scaling into areas where a lot of these other companies aren't even thinking about playing yet.

C (8:55)

Well, again, Travis, I think it speaks to what we were just saying. Directionally this is heading in a direction where there will be more autonomous driving taxis out on the road and there will be more people using them and the technology is getting better. And so we talk about this scaling to a $100 billion industry in the US in coming years. I mean, yeah, it looks like we are heading towards that destination again though, I'll reiterate. I think that underscores once again that this costs do need to come down for both of these companies, whether it's Tesla or whether it's Waymo, they both do need a cost effective solution. Because as you ramp it up and you're still not cost effective, I mean, yeah, it's going to be an issue. What is the point of being first in an industry that has bad economics? I can think about airlines for a good example here. So many airlines have bad economics. It doesn't mean that there's all bad airline stocks.

A (9:48)

Right.

C (9:48)

You can have a good investment in the airline industry, but by and large the industry is plagued by very tough economics. I think that we're still there for autonomous taxis and so one of these does need to improve for it to be a good investment for people out there.

A (10:02)

Yeah, the price that we pay is going to be really important for a lot of these companies. One of the things I like to say is don't pay for upside. That doesn't exist. And in sometimes in business, the upside do you think is coming, isn't there? Maybe that will be the case for some companies in Autonomy. We focused on Waymo here so far, but there are other players in this market. We're going to get to them in just a second. You're listening to Motley fool money.

D (10:22)

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A (11:32)

Welcome back to Motley Fool Money. There are other companies in autonomous driving technology today. Rachel, can you just give us an idea who are the companies that we should be watching? Because it seems like the list is really long. You start looking at it and everybody has some sort of strategy in this space.

B (11:48)

Yeah, you know, there's so many ways to play this space. I mean, we've talked a lot of course about Waymo and what their business model could be front end looks like. But there are a lot of companies that take a much more niche or modular approach to this industry. You know, Aurora Innovation is one example. So they focused on developing a universal self driving system which they call the Aurora Driver. And that's primarily for long haul trucking vehicles. You've got companies like mobileye. Right. They're a leading provider of advanced driver assistance systems technology. Of course that's a key foundation for higher levels of autonomous driving that a lot of these companies are working towards. But you know, you can play the space as well by investing in a company like Nvidia, right? You know, the high end chip maker that's providing all the essential high performance processing power and AI platforms that a lot of these AV developers are using. There's a company called Pony AI, they're an autonomous driving tech company. They're developing robotaxi and robotic trucking services. I think it's really important as well to look outside the us so you've got Baidu, that the Chinese tech giant. They're a leader in the robo taxi race in China with their Apollo Go service. They're expanding into commercial AVs. China is a market where, where adoption of AVs is much, much higher than we are seeing in the us so that's something that's I think really critical.

A (13:01)

It's a default in a lot of their vehicles too.

C (13:03)

It is.

B (13:04)

And again, they have this very rapidly developing domestic AV market. There's broad government support, so you've got a lot of regulatory guardrails in place. We're also seeing a broader establishment of legal and regulatory frameworks for AVs in Europe too. So that's something that's important to watch. So there's a million different ways to play this, right? You've got the legacy, you know, companies like Mercedes Benz Group, they've got Drive Pilot, that was the first level three system that was certified for use on approved roads in certain states. In Germany, by the way, I want.

A (13:33)

To hold on that. Yeah, I think this shocks people. They were actually the first Level three goes to the point where the automaker the vehicle itself is liable if there's a crash. They did that before Tesla, before any of these other companies that are talking about autonomy. It was Mercedes Benz. That just always kind of blows my mind because you don't think of them as even a player in this space. But they were at at least level three first.

B (13:55)

Absolutely. And I think very few people are talking about that or might even be aware of that. And you know, of course you've got Amazon, they've got their, their Zoox Robo taxi service. That's been a very, very limited deployment at this point. But I think the bottom line here is there are so many different opportunities in this space that are just emerging. Looking in different markets outside the US where there's a much more developed regulatory framework like in China and what we are starting to see in Europe I think think provides something of a guide for the market in the US and what that could look like in the coming decade and beyond.

A (14:27)

The other company I want to bring into this John, is we ride. They actually announced this morning that they are pulling the safety driver in Abu Dhabi that is in a partnership with Uber. We'll get to the ride sharing companies in just a second. But where are you fishing when you're looking for opportunities in this space? Because some of the companies that Rachel mentioned, really interesting technology but if we have four, five, six tech companies that are providing this technology that win, do any of them make money? But who has the right connections, the right business model for this moment?

C (14:55)

One of the companies I really find interesting in this space is mobileye. Ticker symbol M B L Y. The reason I think it's so interesting is because it has all of this add on hardware and software when it comes to mapping and it's collecting just so much data when it comes to what we're talking about here, rapidly scaling. I think data is important, I think it's valuable and so this isn't the most headline grabbing company out there. It's not a no brainer. I'm not saying it's a no brainer but I find mobileye very interesting for a variety of possible futures here.

A (15:27)

They are also the company that was kind of the default for what you would call level one autonomy. So smart following lane assist, things like that. And they're sort of trying to move up that stack. Well that's one I'm interested in as well. I'm a shareholder of mobileye so we will see how that plays out with them. When we come back, we are going to talk about how ride sharing could potentially change with autonomy in the future. You're listening to Motley Fool Money.

E (15:51)

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A (16:48)

Welcome back to Motley Fool Money. One of the business models that I think is in question right now is the ride sharing business model. So we're thinking about Uber and Lyft. You can go to doordash for things like food delivery. But John, are these the kind of companies that are going to be winners in autonomy? Does this help improve their supply? Potentially lower their costs? Something that we've talked about? Uber has talked about getting to a dollar a mile, which would be a 50 to 70% improvement from where we are today. Is that going to be a tailwind for these companies or a headwind over the next decade?

C (17:19)

I think the third party aggregators are here to stay. So your, your Ubers, your door dashes, your instacarts, I think they're here to stay. There is a possible future in which the new technology comes online and disrupts them. I concede that point, but I do believe that they're here to stay. I'll use Airbnb as an example here. If you own a short term vacation rental, you can go direct to the consumer. You can have your own website, you can have your own mailing list, you can do all of this. And many of your vacation property owners do have systems in place to collect this consumer data and to bypass Airbnb so that they can make more money and not give Airbnb its take rate. However, by and large, these properties remain on Airbnb because that is where the consumer is, that is where the traveler is. And as much as you try to get away from it. You can't avoid it even if you're a really good property. And so I really see that being kind of your trajectory of where this space is going. Yeah, I think that everyone's going to want to try to move away from the third party aggregators, but getting away from it in practical terms, I don't think they're going to be able to.

A (18:29)

And just to point out how these companies, the, the Ubers and the Lyfts in particular are at least saying they're thinking about this is they think that the market is not going to be individuals owning vehicles and then just letting your Tesla go out and drive around for a few hours to make a few bucks. There's going to be fleet operators. So this is the way that they're actually operating their fleets. Uber and Lyft both are kind of doing some similar things for Waymo. In some cases in the cities where they're partnering, where there's going to be an owner of 10, 20, 100 vehicles, then there's going to be infrastructure in place to charge them, to clean them out, do all that kind of stuff. But it's not necessarily going to be individuals. It's going to be kind of businesses behind the scenes. Rachel, does that make sense to you that we're going to move from. They're going to be still the aggregators, the lifts, the doordashes, the Ubers of the world, but then the suppliers is going to go from individuals to maybe small businesses, maybe, you know, maybe bigger business. Maybe that'll be a public option to invest in these suppliers to ride sharing. But how are you thinking about that potential change?

B (19:26)

I think to a certain extent, and I do think over the next decade and past that, we do start to see new business models emerge like you've outlined. And I do think a company like Waymo clearly has a disruptive element to its business. But I don't think we suddenly see it replace the use cases that we know companies like Uber and Lyft for. You know, I don't think we're going to suddenly have a situation where people are, you know, only going to be going in the back of a driverless vehicle rather than ordering an Uber or Lyft or deciding that that's how they want all their, you know, their food or their groceries or whatever they platforms for.

A (19:59)

Well, the question will be, are you going to download another app?

B (20:01)

Well, there's that too. I think there's still a lot of questions about what is kind of the, the driver of adoption here. And I think that's what these companies like Waymo are still trying to figure out. And what's also interesting is they're specifically testing very different operational models in different markets. Right. So Waymo directly competes with Uber and Lyft in some cities where they're operating their own ride hailing service through the proprietary Waymo One app. Now we've seen in, in San Francisco, for example, they're rapidly gaining market share. They even surpass L and they're challenging Uber's dominance in their operating zone. Obviously that's a small sample size, but then you go to cities like Austin and Atlanta and Waymo's Robo taxis are actually just exclusively available for booking via the Uber app. So that actually expands Uber's service offerings. That's a tailwind for Uber. So I don't think we're going to see a winner takes all situation. I don't think there's just one way for these businesses to play that. And I think they're trying to see what business models stick. It's really, really early days still and I think that's one of the exciting things about this space.

A (21:04)

Yeah, that's right. That's one of the reasons I think we should talk about way more more is they are throwing things at the wall and seeing what sticks. They've seems like they've figured out the safety thing. Now. Can you scale the business? Can you move into more cities? Can you lower your costs? That's something they're going to have to answer. Other companies have different answers to that. And then you have the ride sharing piece. What are they going to do and what is everybody else going to do? Because they are using some of these demand aggregators to help scale their business, but not in every case. So they could definitely go their own way if they build a big enough brand. So a lot of opportunities, potential risks here for investors, but definitely something we should be keeping our eye on over the next 10 years. As always, people on the program may have interest in the stocks they talk about. The Motley Pool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. All personal finance content follows the Motley Pool's editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes for Rachel Warren, John Quast, Bart Shannon, behind the Glass, and the entire Motley fool team. I'm Travis Hoyam. No show for us tomorrow, as we do have the Thanksgiving Day holiday. We'll be back on Friday. Thanks for listening to Motley Fool Money.