Autonomous Vehicles

Summary

The following is a summary of a video recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.

I’m Tasha Keeney and I Direct Investment Analysis for ARK and research for the autonomous technology and robotics team. And today I’m going to be talking about autonomous vehicles.

So, robotaxis are available to the public today in select cities in the US, in China and in the Middle East. You know, we used to be asked, will this technology be possible? Now, that’s very clear. There are cars roaming around without anyone in the front seat or the passenger seat that are able to pick up passengers fully autonomously.

What’s interesting and what’s developed in the past year is that we’re seeing that within its operation zone, Waymo is actually competing with Uber and Lyft and more specifically Lyft here, as you can see in terms of market share. So even though they have a relatively small fleet, it’s clear that they’re offering a service that is competitive with today’s human driven right hail options.

But you know, I mentioned the fleet of small to really proliferate. We think that data advantages are still key. There are two graphs here which my colleague Daniel Maguire made so daily robotaxi miles, and this is looking at what’s actually commercial in terms of robotaxi service. So, you can see here Waymo in the US and Baidu through its Apollo Go program in China are leading with commercial driverless miles.

But when you zoom out to look at total data captured, which is the slide all the graph all the way on the right. This is cumulative, cumulative autonomous miles. You can see here that Tesla globally really surpasses any other competitor. This is because they collect video off of their customer vehicles. All of the cars are equipped with sensor sets that are capable of sensor sets and an on-board computer system that’s capable of turning the car into a fully autonomous car through software updates.

So, because of that, Tesla has this immense data advantage that really no one else has. It’s driven both by the fact that they’ve been doing this for a while, having cars roll out the assembly line with this capability, plus the fact that they have a large consumer customer fleet driving this. So, they have, you know, millions of cars versus thousands of competitors.

So, we think that data advantage is really key to scaling this service and to advancing that technology in the future.

And why are we talking about robotaxis at all? Well, you know, the most important piece of research to remember here, and we’ve been saying this for years, is that autonomous vehicles will be cheaper than human driven vehicles. And what do I mean by that? Well, if you look at the graph on the right here, you can see the average price of human driven ride hail and western markets is a little less than $3. Now with inflation and then the cost of driving a personal car is a little less than a dollar.

A robotaxi could price profitably to the consumer at just $0.25 that is at scale. So of course there are many price points in between that $2.80, actually even higher than 2.80 at more of a premium price segment say. But you know, in between the to 2.80 and $0.25, there’s actually a lot of support for higher price points.

Really, we think that autonomous driving is compelling because it will lower the cost of transportation. It’ll be cheaper than you driving your personal car and it’ll be much cheaper than ride hail. But at scale that could be as cheap as $0.25.

And in the early days, what’s really critical here is, you know, the I mentioned scale previously. Well, scale in Tesla’s case, in terms of manufacturing, scale also matters quite a bit. You can see that here in the graph on the left.

So, if you’re comparing Waymo and Tesla, you know, Waymo purchases vehicles from automotive partners. They then add on; they integrate with partners a sensor set onto that vehicle. So, if you if you look at the, you know, the price of the car plus the sensor set, which of course adds to like the incremental depreciation cost for the car because it is a more expensive car than what’s rolling off the Tesla assembly line.

We actually think that, you know, today with the cars that are driving on the road, the previous generation of Waymo and the Model Y’s which Tesla has started to use in its robotaxi fleet, Tesla already has a 35% cost advantage. But at scale we think this could be up to a 50% incremental cost advantage per mile.

This matters a lot in the early commercialization days when utilization on the fleet is low. The underlying cost of the car matters significantly then at scale we expect the utilization rate on the car, so how often the car is actually driving around and making revenue to really be what drives down that cost per mile.

But this goes to show that being a vertically integrated automaker really matters. And, you know, autonomous ride hail could dominate urban transit.

So, there’s a great blog that my colleague Daniel put out earlier this year where he looked at these are top Red Hill cities. And you can see here the peaks and troughs of when people need transportation during the day.

The point that we’re making in big ideas is, OK, if you look at all of urban miles today, ride hail is actually just a very small percentage of those miles. Still, it’s around 1%, even though in some cities that might be up to 10. As a whole in the US, it’s around 1% and autonomous taxis, a smaller, you know, fewer autonomous taxis could replace many vehicles on the road today.

So actually, just to supplant what’s currently happening in human driven right hill, you’d only need 140,000 robotaxis because they will have higher utilization rates than the right hill vehicles that are on the road today. You know, to put that in perspective, that’s like maybe a month of production for Tesla.

You can see here on the graph that Tesla actually with you know, its current vehicle lineup and of course if you look at the top line, the cyber cab expected capacity, they already could satisfy ride hail demand in many of the top ride hail cities in the US today.

And for the US as a whole, 24,000,000 robotaxis, which is actually less than 10% of the registered vehicle fleet in the US, could supplant actually all of urban miles again thanks to that higher utilization rate.

And robotaxis could generate around $34 trillion of enterprise value in 2030. We’ve said this in the past, I’ll, I’ll repeat it again here, that we think that the majority of the economics will accrue to the autonomous technology providers, the platform providers, these are the companies that have built the technology stack that allows the car to drive itself because that it is what lowers the cost per mile here.

And what will we think ultimately drive demand and the biggest risk to this forecast I will point out is that outside of Tesla, many of the traditional automakers and automaker partners to the technology players like Waymo have not made very large scale promises in terms of the fleet of robotaxis that they plan to have on the road in the next five years.

So, we’re taking a bit of a leap of faith here. You know, we have many players in China, for instance, where things can happen at lightning speed really overnight in terms of manufacturing scale looking to build out robotaxi platforms. So, we do expect more competitors to emerge, but I’m noting that that’s, that’s actually the biggest risk to the forecast today.

And then lastly, you know, we lay out here the, the different parts of the ecosystem that and the previous slide, we outline some of the value that it will accrue to each of those pieces. Again, the piece of the puzzle that you want to be in to get the majority of the economics is the autonomous technology platform piece.

We also think that fully electric automakers have a space here. We you know, roughly a little less than 10% of the revenue, around 1% of the enterprise value. That’s really just because again the enterprise value that we see on the platform side is so much larger.

And then fleet operators are lead generators. These are companies like the ride hail Partners that some of the technology providers has chosen. Also, the companies that will maintain the vehicles. These may not be the companies that we know today, by the way. It could be a startups that emerge in the space. But this is other important part of the puzzle that you need to launch a robotaxi service.

Of course, some players might fall into all three buckets. You can see us delineating that on the slide here. But again, the bucket that will create the most value is the technology platform.