The Best Robotaxi Stock to Buy Now
Tesla unveiled the Cybercab and Robovan on Oct 10. Elon Musk said he expects the Model 3 and Model Y to support unsupervised full self-driving in certain states by the end of next year and the Cybercab to go into mass production by 2027.
However, Musk didn't elaborate on the details of how a robotaxi business would actually work. Will Tesla operate the network? Will it sell cars to a network operator? Can Cybercab owners put their cars into the fleet of vehicles to earn money while they sit at work or home? How to achieve low costs?
Independent testing by AMCI and crowd sourced data showed that distance between human interventions for Tesla EVs is only about 13 miles. For Google's Waymo, Cruise and other robotaxi operators, the distance is greater than 10,000 miles.
Even if Tesla improves by 10x, it would be far short of the safety standard of robotaxi of 10,000 miles. How does Tesla intend to improve by 1,000x?
There were too many unanswered questions.
Musk has yet to show a clear path from where we are now to that future of robotaxis.
Investors looking to get in on the growing trend toward robotaxis and autonomous vehicles may be better off looking at a different company. Waymo has been working on self-driving technology for 15 years and already has a fully operational robotaxi business in three states. It's well ahead of Tesla and its competition, but investors can get it for cheap as part of Alphabet.
Waymo currently operates its robotaxi service in 4 markets: Los Angeles, San Francisco, Phoenix, and Austin, Texas, where it recently launched. A few weeks ago, management shared that it's now completing 100,000 paid rides per week. That's double from management's previous disclosure in Jun.
The operation is growing quickly. Not only is it now offering commercial fares in 4 major cities, it's also partnering with several companies to grow faster. It struck a deal with Uber last month to add a fleet of its Jaguar I-Pace vehicles in Austin and Atlanta in early 2025. This month, it struck a partnership with Hyundai to integrate Waymo's technology into the Ioniq 5 SUV, which Waymo will add to its own fleet in 2026. It can get EV makers to manufacture robotaxis for it.
Some people say that Tesla has the upper hand. They say that Tesla has millions of its EVs on the road and clocked 1 billion miles. But I disagree. Waymo already has robotaxi operations, Tesla doesn't. Tesla's miles are all supervised and none unsupervised. Waymo's hundreds of miles are all covered by robotaxis.
Moreover, not all Tesla EVs can be converted to robotaxis by OTA (Over The Air) upgrade. Waymo can achieve scale by partnering with ride hailing companies and EV makers.
Waymo and Cruise have redundant safety systems in Lidars, sensors and cameras. If one system fails, other systems can be used as backup. Whereas, there's no backup if Tesla's cameras fail. Also, there are more than a dozen cases of Tesla EVs crashing into parked emergency vehicles. Apparently, Tesla's cameras are confused by flashing lights. Cameras also don't work well in bad weather.
Tesla's Autopilot should have detected the emergency vehicles and braked. But they didn't. Waymo's Lidar would have detected and avoided the accidents.
Waymo's also making efforts to improve its technology in order to bring costs down. It announced the latest iteration of its autonomous vehicle system in Aug, touting, "With 13 cameras, 4 lidar, 6 radar, and an array of external audio receivers (EARs), our new sensor suite is optimized for greater performance at a significantly reduced cost, without compromising safety."
Driving costs down will be essential to making the business profitable. The equipment for the previous generation AV system cost as much as USD100,000 when equipped on a Jaguar I-Pace. Those costs will come down as the technology improves and Waymo integrates and scales production through partnerships like the one with Hyundai. With new technology, Lidars can be miniaturised and costs reduced.
In the meantime, Alphabet can generate billions in free cash flow as it gets its operation off the ground and scales the business. That's enabled it to get a head start over the competition. And in a business where the network is extremely valuable, coming in as the first mover in a matter of years puts Waymo at a huge advantage for years to come.
No, the best robotaxi stock to buy now is not Tesla. It's Alphabet.
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