The robotaxi wars are heating up. After an initial delay, Tesla (NASDAQ: TSLA) has a robotaxi event planned for October, while General Motors‘ (NYSE: GM) Cruise recently signed a deal with Uber to offer autonomous vehicles on the taxi company’s platform next year.
However, there is currently one company that is ahead of the competition and that is Waymo, owned by Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL)Let’s take a look at why I think Alphabet will be the leader in robotaxis.
First mover advantage
Right now, Waymo is way ahead of the pack with customers actually using its robotaxi services. The company recently announced that it was offering 100,000 paid robotaxi rides per week, which is about 100,000 more than Tesla and Cruise combined currently offer.
This is double the number of rides Waymo offered in May. The company currently operates in four U.S. cities: San Francisco, Phoenix, Austin, and Los Angeles. The company plans to expand to other cities within the corresponding states. Currently, only California, Texas, and Arizona allow autonomous taxi services.
Waymo also recently unveiled its sixth-generation self-driving technology, which is intended to reduce the cost of the vehicles. The new technology will reduce 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 of technology on public roads with professional drivers on board. In addition to reducing costs, the new technology is also designed to handle more weather conditions.
With Waymo being 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 incidents, which will only increase confidence in its offering as it expands. In the meantime, it’s also important to reduce the cost of its vehicles, as this will improve the economics of the service.
Earlier this year, Alphabet announced it would invest an additional $5 billion in Waymo to help the company further expand its operations.
Tesla has a history of over-promising and under-delivering
Although Tesla has a major robotaxi event planned for October, the company has yet to provide a single paid ride to customers. And yet, for years, Tesla has been telling everyone that it would turn customers’ vehicles into fully autonomous cars with a software update.
In 2016, the company wrote a blog post stating that all of its cars were now being produced with self-driving hardware. However, seven years have passed and none of Tesla’s driving systems are fully autonomous; they all require a driver to assist them. Meanwhile, older hardware has had to be upgraded to implement the latest “Full Self-Driving” (FSD) service at the customer’s expense, which has led to lawsuits.
And in December 2023, Tesla was forced to recall more than 2 million vehicles to install new Autopilot safety features. However, the National Highway Traffic Safety Administration (NHTSA) was forced to investigate the recall after 20 crashes were reported following the installation of the updated software. There have been about 1,000 reported car crashes involving Tesla’s Auto Pilot system in recent years.
There are many critics of Tesla’s robotaxi efforts. In July, Rolling Stone questioned whether Tesla even has the technology to build a robotaxi, citing some of the company’s critics. The publication followed that up in August with a test drive of the company’s self-driving technology. The author of the Rolling Stone The article states that they did not feel safe and that the technology almost caused an accident.
Rolling Stoneisn’t the only news source to question Tesla’s autonomous driving technology, however; InsideEVs reported that during a test drive, bad weather compromised the vehicle’s FSD system. It noted that the car stopped dangerously in the middle of a highway to let a car pass, and also attempted to veer off the road and into a furniture store. It said a lack of additional radar and lidar could be the cause.
While Tesla optimists like Ark Investment keep repeating that Tesla is training its autonomous vehicles with more data, giving the company an edge, real-world applications appear to be lacking so far.
Cruise has had problems in the past
Meanwhile, GM’s Cruise unit has had its own problems. One of its robotaxis was involved in an incident in which the vehicle dragged a pedestrian after the person was struck by another vehicle. California subsequently revoked its license last October, and Cruise decided to cease operations.
The incident led to the resignation of several key leaders at the unit, while Cruise has been bleeding cash since GM took over in 2016.
While the Uber deal is a positive step, the safety issue does cast a shadow over the company, which is currently allowed to operate in three cities: Dallas, Houston and Phoenix.
Time to buy Alphabet stock
With Alphabet expected to trade at a price-to-earnings ratio of 19 next year, the stock appears cheap.
GOOGL PE ratio (forward 1 year) data from YCharts.
At this point, given Alphabet’s valuation, investors are essentially getting a free call option on Waymo. If it’s a huge success, investors will win, but if it fails, they won’t really be hurt. That’s a big difference compared to Tesla, where much of the bullish thesis surrounding the stock revolves around its future robotaxi business as electric vehicle (EV) growth slows.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Geoffrey Seiler holds positions at Alphabet. The Motley Fool holds positions at and recommends Alphabet, Tesla and Uber Technologies. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.
Prediction: Alphabet, Not Tesla, Will Be The Robotaxi Leader was originally published by The Motley Fool
