Thoughts on the Market: Driverless Cars Take the Fast Lane

Host: Brian Nowak, Morgan Stanley’s Head of U.S. Internet Research
Guest: Andrew Prococco, Head of North America Autos and Shared Mobility Research
Date: January 8, 2026
Length: ~10 minutes

Episode Overview

In this forward-looking episode, Brian Nowak and Andrew Prococco dissect why 2026 could be a pivotal year for autonomous vehicles (AVs) in the U.S., pointing to rapid city-by-city expansion, technological progress, shifting costs, safety milestones, and the evolving partnership landscape between AV operators and rideshare platforms. The discussion offers data-driven insights into the race between companies like Waymo and Tesla, the economic ramifications for the rideshare industry, and what milestones investors and industry watchers should keep an eye on throughout the year.

Key Discussion Points & Insights

1. The City-by-City Expansion of AVs (00:46 - 02:22)

• Growth in Urban AV Availability

  • Autonomous vehicle rollout is accelerating: AV accessibility in U.S. urban areas is expected to double from 15% (2025) to over 30% by the end of 2026.
  • Expansion will be led by Waymo, Tesla, Zoox, and others increasingly spreading into new markets.

• Notable New Markets

  • 2026 marks the likely debut of AVs in challenging “snow cities” (Washington D.C., Colorado, Michigan), allowing for proof-of-concept in adverse weather conditions—a key technical milestone.

Quote:
"We think that overall availability for autonomous driving in the US is going to go from about 15% of the urban population at the end of 2025 to over 30% ... by year end 2026."
— Brian Nowak (00:46)

2. Critical Drivers for AV Adoption (02:22 - 04:00)

• Regulatory Landscape

  • Progress is still heavily dependent on state-by-state regulatory approval, a bottleneck but perhaps an area for future harmonization.

• Technology & Safety

  • AV platforms must convincingly prove their tech is safer than human drivers; accumulating robust mileage without incidents is key both for regulatory comfort and consumer trust.

• Cost Structure and Competition

  • There’s stark pricing contrast among AV services:
    • Tesla: Holds a 40% cost advantage due to lower vehicle price point ($35,000) and a “camera-only” sensor design (excluding expensive lidar/radar).
    • Waymo: Superior safety record, but higher costs due to sensor complexity.

Quote:
"Each of the platforms needs to prove that their autonomous offerings are significantly safer than human driving. That is also linked to regulatory approval."
— Brian Nowak (03:08)

3. The Safety vs. Cost Debate: Tesla vs. Waymo (04:00 - 05:49)

• Cost Advantage: Tesla

  • Tesla’s approach, using only cameras (no lidar/radar), reduces costs dramatically.
  • Vertical integration also gives Tesla manufacturing scale and pricing power.

• Safety Data: The Key Hurdle

  • Tesla: Roughly one crash every 50,000 miles (Austin data, 250,000 miles driven).
  • Waymo: Far ahead at one crash every 400,000 miles, with ~100 million miles in its dataset.
  • Tesla’s lower safety, with relatively low miles logged, is its Achilles’ heel—expected to improve as scaling continues.

Quote:
"On our math, about a 40% cost advantage [for Tesla] relative to Waymo today. Now going forward... the key hurdle here or bottleneck that Tesla still needs to prove is their safety."
— Andrew Prococco (04:09)

4. Partnerships & Impact on Rideshare Industry (05:49 - 08:03)

• Tesla’s Non-Partner Approach

  • Tesla is scaling AVs independently, not collaborating with Uber, Lyft, or others (unlike Waymo).
  • The pace at which Tesla removes “safety drivers” and opens public access could redefine both AV competition and impact rideshare incumbents.

• Potential Industry Disruption

  • Current (2024): Uber/Lyft control 100% of rideshare.
  • Projected: With growing AV partnerships (Waymo-Uber/Lyft, but not all cities), Uber/Lyft’s share of the AV-driven rideshare market could drop to just 30%.

• Market Expansion or Cannibalization?

  • Debate remains whether AVs will expand the rideshare market meaningfully (incremental growth) or mainly steal share from existing rides. Even at rapid growth, AV trips are projected to be <1% of total car trips by 2032.

Quote:
"As of 2024, Uber and Lyft make up 100% of the rideshare industry... we think that Uber and Lyft will only make up 30% of the autonomous driving market [in the future]."
— Brian Nowak (08:00)

5. Forward-Looking Metrics for Investors (06:42 - 09:29)

• Key Catalysts for 2026:
  • Watching Tesla’s removal of safety drivers, scaling, and public rollout timing—especially in Austin.
  • Tracking AV safety statistics, especially as total miles accumulate and new geographies come online.
  • Monitoring cost reductions; when will robo-taxis undercut private car ownership?
  • Size and share of incremental rideshare market captured by AVs.

Quote:
"I think this is going to be the kind of key catalyst... is how that data [Tesla crash rates] improves over the course of 2026."
— Andrew Prococco (04:53)

Memorable Moments & Notable Quotes

• Personal Experience:
  "No edge cases, no issues. So all, all five star reviews for me."
  — Andrew Prococco, discussing firsthand AV rides (00:40)

• The Inflection Point:
  "I think it's really clear that the future of autonomous vehicles is here and we've reached an inflection point and there's a lot of interesting catalysts and data points..."
  — Andrew Prococco (09:29)

Timestamps for Key Segments

• 00:00 – 00:46: Introductions & overview of AV scaling predictions
• 00:46 – 02:22: Urban availability doubling, AV city expansion
• 02:22 – 04:00: Regulatory, safety and cost as core AV adoption drivers
• 04:00 – 05:49: The Tesla vs. Waymo cost & safety showdown
• 05:49 – 08:03: Rideshare partnerships, market share shift, and future landscape
• 08:03 – 09:29: Long-term growth, tam, cost roadmap, and future disruption indicators

Summary Takeaway

2026 is shaping up to be a fundamental turning point for autonomous vehicles, with major city rollouts, mounting safety improvements, and a possible shift in the balance of power between AV companies and the rideshare giants. Tesla and Waymo present contrasting models—speed and scale versus safety and partnerships—which investors, regulators, and the broader public will be watching closely as AVs hit the fast lane and potentially redefine urban transportation.