Waymo looks way ahead of Tesla at this point.
The robotaxi wars are heating up. After an initial delay, Tesla (TSLA 3.80%) has a planned robotaxi event in October, while General Motors‘ (GM 0.63%) Cruise recently struck a deal with Uber to offer autonomous vehicles on the ride-sharing company’s platform next year.
However, there is currently one company ahead of the pack and that is Waymo, owned by Alphabet (GOOG 1.05%) (GOOGL 0.99%). Let’s take a look at why I think Alphabet will be the robotaxi leader moving forward.
First-mover advantage
At this point, Waymo is way ahead of the pack, with customers actually using its robotaxi services. The company recently announced that it is providing 100,000 paid robotaxi trips a week, which is about 100,000 more than Tesla and Cruise combined are currently offering.
This is double the number of trips Waymo was providing in May. Currently, the company is operating in four U.S. cities: San Francisco, Phoenix, Austin, and Los Angeles. It plans to expand into other cities within the corresponding states. At present, only California, Texas, and Arizona permit autonomous-taxi services.
Waymo also recently unveiled its sixth-generation, self-driving technology, which will look to reduce the costs of the vehicles. The new technology will lower the number of cameras around the vehicles from 29 to 13 and the number of lidar sensors from five to four. Waymo is currently testing the new-generation technology on public roads with professional drivers on board. In addition to cost savings, the new technology has also been designed to handle more weather conditions.
With Waymo the only robotaxi service currently operating in the U.S., the company has a nice first-mover advantage. Customers are already using its fleet without major incident, which will only build confidence in its offering as it expands. Meanwhile, driving down costs with its vehicles is also important, as this will make the economics for the service better.
Earlier this year, Alphabet announced that it would invest another $5 billion into Waymo to help the company continue to ramp up its business.
Image source: Getty Images.
Tesla has history of overpromising and underdelivering
While Tesla has a big robotaxi event planned for October, thus far, the company has not delivered any paid rides to customers. And yet, for years Tesla has been telling everyone it would turn customer vehicles into fully autonomous cars with a software update.
In 2016, the company famously wrote a blog post that all its cars were now produced with self-driving hardware. However, seven years have passed, and none of Tesla’s driving systems are fully autonomous; they all need to be supervised with a driver. Meanwhile, the older hardware has needed upgrading to run its latest “Full Self-Driving” (FSD) service at the cost of the customer, which has led to lawsuits.
And in December 2023, Tesla had to recall more than 2 million vehicles to install new Autopilot safeguards. However, the National Highway Traffic Safety Administration (NHTSA) had to investigate the recall after 20 reported crashes followed the installation of the updated software. Over the last few years, there have been about 1,000 auto accidents reported involving Tesla’s Auto Pilot system.
Critics of Tesla’s robotaxi efforts abound. In July, Rolling Stone questioned if Tesla even has the technology to build a robotaxi, citing a number of critics of the company. The publication followed that up in August with a test drive using the company’s self-driving technology. The author of the Rolling Stone article said they did not feel safe and that the technology almost caused an accident.
Rolling Stone, though, isn’t the only news source to question Tesla’s autonomous-driving technology; InsideEVs reported that in a test drive, bad weather compromised the vehicle’s FSD system. It noted that the car dangerously stopped in the middle of a highway to let a car pass, and also tried to turn off the road and into a furniture store. It said that a lack of supplemental radar and lidar could be to blame.
While Tesla bulls, like Ark Investment, will parrot that Tesla is training its autonomous vehicles with more data and thus will give it an advantage, so far its real-world applications appear to be falling short.
Cruise has had past issues
GM’s Cruise unit, meanwhile, has had its own issues. One of its robotaxis was involved in an incident in which the vehicle dragged a pedestrian after the person was hit by another vehicle. California subsequently suspended its license last October, and Cruise then decided to pause all operations.
The incident led to a number of key leaders at the unit being dismissed. Meanwhile, Cruise has been bleeding money since GM acquired it in 2016.
While the deal with Uber is a good step, this safety issue does leave a bit of a cloud over the company. It is currently authorized to operate in three cities: Dallas, Houston, and Phoenix.
Time to buy Alphabet stock
With Alphabet trading at a forward price-to-earnings (P/E) ratio of 19 next year’s analyst estimates, the stock looks cheap.
GOOGL PE Ratio (Forward 1y) data by YCharts.
At this point, given Alphabet’s valuation, investors are basically getting a free call option on Waymo. If it becomes a big success, investors will win, but if it fails, it really won’t hurt them. That is a big difference compared to Tesla, where a lot of the bullish thesis around the stock centers around its future robotaxi business as electric vehicle (EV) growth slows.