The iPhone moment of Autonomous driving cars
This is another article that I want to write after listening to an a16z podcast. These folks talked about the iPhone moment of autonomous driving cars which I want to echo. When iPhone was first launched in 2007, not many people realized that it was the start of the mobile era, including the decision maker at the traditional telecom giants like Ericsson, Nokia and Motorola.
In a hindsight, as iPhone started to gain sales rapidly, it enabled many more mobile-based business like Uber/Lyft.
Similar stories will likely happen for autonomous driving cars. In 2020, we see Waymo operating its RoboTaxi service in Chandler, Arizona. In the next few years, we will see Waymo and potentially other competitors launching RoboTaxi services in major metropolitan areas like San Francisco, Miami, LA etc. As the coverage of RoboTaxi services expand, it will trigger many other changes in automobile ownership, insurance, city planning and many more.
Very likely in the next 5 to 10 year time frame, autonomous EVs will be running through cities and suburbs. Car ownership becomes unnecessary to most people. New battery technologies could steepen the edge of EVs over ICE vehicles due to faster charging, cheaper cost and wider applicable scenarios.
As of now, all of Google, Apple and Amazon are trying to grab a piece of the autonomous driving pie. Google’s spun-off Waymo is obviously leading in the race. Amazon purchased Zoox in June 2020 and hoping to participate in the competition. Apple made an announcement in late 2020 that it will start to make EVs in 2024. Intel has Mobileye, which is partnering with many car makers to develop RoboTaxi fleets.
Below is some of my thoughts on autonomous driving.
Who will get there?
As of EOY 2020, the only player that has achieved L4 autonomy is Waymo. Everyone else still have a driver inside of the vehicles. One can safely say that Waymo has an advantage in this race, but when competitors are going to get where Waymo is now? The development of L4 autonomy is extremely costly. In terms of Waymo, it probably has already spent $10b since it first conceived as a Google X project. No wonder that Alphabet has tons of cash to invest in Waymo. But this isn’t the case for many competitors. Most of the smaller companies probably won’t deliver an L4 system before they get bought or go out of business. The ones that are strongly backed by very profitable companies are the ones to watch. I think in this regard, Zoox is the one to watch as Amazon can provide a lot more computing service to it which is a critical resource for the software development cycles. There are also companies like mobileye (division of Intel) that may also land L4 in the future, although Intel isn’t as rich as Google and Amazon. Google has the most boxes checked in terms of technological readiness for developing self-driving cars. It has the most brilliant minds in the software/machine-learning stack, it’s the developer of TensorFlow, it has the computing power to support software development cycles, it has 100b+ cash… all other competitors can only wish to check a subset of these boxes. In the end, I think the real race to roll out RoboTaxi service to the mass market is going to be between 2–3 companies at most in the next 5–7 years and Waymo is likely to have a period of ~3 years to be the sole player in the North America.
What’s the trophy?
It seems imminent that the prize is huge as all the tech giants are jumping in to this race.
Uber in the year of 2019 had $65,001(in millions) total booking and 6,904 (in millions) trips. The average cost per trip is about $9.41. Lyft has total revenue of $3,615(in millions) in the year of 2019, and it did not report the total trips number for the year of 2019. The combined revenue of Uber and Lyft in 2019 is 69b, and about 80% of the revenue is from metropolitan areas where RoboTaxi services will prioritize to tackle. Once the cost of drivers are ruled out from the equation, ride-hailing cost is likely drop by very significant margin. Let’s say the RoboTaxi cost 60% of what Uber/Lyft costs and it will make about 40% out of the revenue. Then the marginal profit is about 69b*40% which is about 28b based on the 2019 market size of it. If the market can give it a multiple of 50, then it will value of RoboTaxi service at about > $1T. This is the valuation of the RoboTaxi service only and not counting in the growth in total bookings due to the cost cut of it. In the end, it’s very likely a multi-trillion dollar market just looking into the RoboTaxi scenario. Once this service extends to food/goods delivery and trucking, it’s likely to become a $10T industry in the next 10 year or longer period of time.
Next big thing.
Tech folks often ask what the next big thing is. This obviously is. The full effects of it, likely what iPhone brought 10+years ago, will take a decade to realize.
