Thoughts on the Market: Special Encore – AI Takes the Wheel

Morgan Stanley | Host: Adam Jonas & Tim Shao | Sept 17, 2025 (originally aired Aug 21, 2025)

Episode Overview

This special encore episode explores how artificial intelligence (AI) is transforming the global auto industry, shifting focus from traditional horsepower to "brain power." Adam Jonas, Head of Embodied AI & Humanoid Robot Research at Morgan Stanley, and Tim Shao, Greater China Auto Analyst, discuss rapid advancements in smart vehicles, EV adoption, regulatory landscapes, and the evolving business and geopolitical dynamics shaping the industry—all with an eye toward the coming decade.

Key Discussion Points & Insights

1. The Shift from Horsepower to Brain Power (00:36)

• Global Context: Automakers worldwide are channeling vast investments into AI, turbocharging the transition to self-driving vehicles and intelligent mobility systems.
• Market Projection: "AI is the engine behind what we think will be a $200 billion self-driving vehicle market by 2030." — Adam Jonas [00:40]

2. China's Outsize Role in Smart Vehicle Adoption (00:58–02:12)

• EV and Smart Driving Penetration:
  • China leads the world in EV sales, accounting for over 50% of both local and global EV sales.
  • Tech-driven competition is pushing rapid deployment of advanced driver assistance features—Level 2+ (steering, acceleration, braking, hands-off driving).
  • Forecasts: 60% of new vehicles in China to have Level 2+ capabilities by 2030 (vs. 17% elsewhere).
• Drivers of China’s Growth:

  • Fierce domestic competition

  • Government support and evolving regulations

  • Cost-efficient supply chains

  • Aggressive rollout complemented by swift tech adoption

    “Chinese government support and cost competitive supply chains also help. So we are looking for China's adoption of Level 2 plus smart driving on passenger vehicle to reach 25% by end of this year and 60% by 2030…” — Tim Shao [01:56]

3. Regulation & Safety: Navigating Rapid Innovation (02:12–03:15)

• Legislative Focus:

  • China has been rolling out new standards and pilot programs (e.g., Level 3 pilots in 2023).

  • Moves to ban misleading marketing terms (e.g., "autonomous driving") and impose stricter testing.

  • Ongoing efforts to avoid regulatory gray zones and "bad money driving out good."

    “More detailed industry standard and regulatory measures… are important to prevent the bad money from driving out goods.” — Tim Shao [02:55]

4. Robo Taxis & Urban Mobility Transformation (03:15–04:37)

• Status & Outlook:

  • Still nascent, with <1% penetration but poised for growth—expected to reach 8% of China’s taxi and ride-share fleet by 2030.

  • Supported by designated pilot zones and clear safety frameworks.

  • Anticipated impacts: reduced transportation costs, less congestion, fewer accidents.

    “The proliferation of Level 4 robotaxis will eventually reshape urban mobility…” — Tim Shao [03:59]

5. Global Revenue Opportunities & Robot "Species" (04:37–06:15)

• Beyond Cars:

  • Adam Jonas conceptualizes robots as an emerging species with diverse platforms—flying, driving, walking, crawling, etc.

  • Robot "brains" (sensors, AI models, memory) and "bodies" (actuators, batteries, physical architectures).

  • Revenue and value creation spread across hardware, software, integration, energy, compute, and more.

    “We are entering a new scientific era: the AI world... coming into far greater mental contact and physical contact with the hardware world.” — Adam Jonas [04:42]

6. Next Frontiers: Humanoids & eVTOL (06:15–07:53)

• Industry Pivot:

  • Manufacturers are moving from cars toward “humanoids” (embodied AI) and electric vertical takeoff and landing vehicles (eVTOLs).

  • Lessons from robo taxis are directly transferable to aviation—expected to make “low altitude economy” (e.g., urban air mobility) accessible and cost-effective within years or decades.

    “Anything that can be electrified will be electrified. Anything that can be automated will be automated.” — Adam Jonas [06:41]
    “The Wright brothers can finally get excited that their invention from 1903... could finally really change how humans live and move.” — Adam Jonas [07:44]

7. Business Models in Flux: From Ownership to Utility (07:53–09:59)

• Industry Disruption:

  • The era of personal car ownership may wane as mobility shifts toward a utility model akin to water, power, or telecom.

  • The marginal cost of travel could drop dramatically, with vehicle access hyper-convenient and affordable.

  • Structure of the industry—and who wins or loses—will change dramatically.

    “Individual vehicle ownership may go the way of horse ownership... It'll be seen as a nostalgic privilege, if you will...” — Adam Jonas [08:50]

8. Geopolitical Dynamics & “Coopetition” (09:59–11:36)

• US-China Relations:

  • Despite tariffs and tech restrictions, practical industry cooperation is expected.

  • US carmakers seek to localize Chinese tech and products—balancing national security with commercial realities.

    “In order to reduce the United States dependency on China, we need to work with China. So there’s the irony here…” — Adam Jonas [10:23]

• Tech Deflation:

  • Cross-border partnerships may accelerate technology diffusion and lower costs, catalyzing tech "deflation" globally.

9. Looking Forward

• Vision:
  • The “road ahead isn’t just smarter, it’s faster, more connected and increasingly autonomous.” — Tim Shao [11:36]
• Investment Thesis:
  • The sector’s transformation will play out over decades, but actionable opportunities exist now for forward-looking investors.

Notable Quotes & Memorable Moments

• “AI is the engine behind what we think will be a $200 billion self-driving vehicle market by 2030.” — Adam Jonas [00:40]
• “China's adoption of level 2 plus smart driving... to reach 25% by end of this year and 60% by 2030…” — Tim Shao [01:56]
• “Anything that can be electrified will be electrified. Anything that can be automated will be automated.” — Adam Jonas [06:41]
• “Individual vehicle ownership may go the way of horse ownership...” — Adam Jonas [08:50]
• “In order to reduce the United States dependency on China, we need to work with China. So there’s the irony here…” — Adam Jonas [10:23]
• “The road ahead isn’t just smarter, it’s faster, more connected and increasingly autonomous.” — Tim Shao [11:36]

Important Timestamps

• 00:36 – Theme introduction: AI as the "engine" of auto industry transformation.
• 01:13 – Why China leads in smart vehicle deployment.
• 02:12 – How China regulates aggressive rollout.
• 03:15 – Outlook for robo taxi adoption.
• 04:37 – Global revenue and robotics segmentation.
• 06:41 – EV and autonomy pivot to eVTOL and broader robotics.
• 08:24 – Shift from car ownership to utility model.
• 10:23 – Geopolitics: US-China “coopetition” on tech.
• 11:36 – Closing vision and industry direction.

This episode provides a concise but powerful overview of how AI is rapidly refashioning the global auto landscape, highlighting both the near-term business opportunities and long-running societal impacts. For any listener seeking a strategic perspective on automotive innovation, mobility, and the role of China, this conversation between Adam Jonas and Tim Shao is illuminating and timely.