Alphabet’s self-driving car unit, Waymo, is finally entering its high-speed development phase. After years of heavy investment and losses, Waymo’s ridership is rebounding in its existing West Coast markets, and the company just signed an expanded partnership with Uber to bring its robotaxi service to the ride-hailing giant’s Texas-based Apps for Atlanta and Austin, ST. Waymo and Uber are already partners in Phoenix. The ridership growth and deeper ties with Uber are important milestones for Waymo and its parent company, which has poured billions of dollars into the venture but appears to have received little return for investors. The timing couldn’t be better: Waymo’s show of strength comes just weeks before electric-vehicle pioneer Tesla will host its highly anticipated robotaxi event on October 10. The only commercial robo-taxi service operating in the United States will shine a spotlight on the broader state of self-driving technology, which has experienced considerable hype and safety hurdles over the past decade. While it’s still a nascent industry, it’s becoming increasingly clear that Waymo will be an important player in its growing commercial future. “To this day, Waymo has been a huge disappointment. I don’t think so anymore,” Jim Cramer said last week shortly after announcing expansions in Austin and Atlanta. “That’s the substantive reason to stay at Alphabet,” added Jim, who has expressed disappointment with the performance of the club’s stock in recent months and expressed regret for not paring his position more aggressively. Jim said Waymo has the potential to become “a very big business.” GOOGL .SPX 1Y mountain Alphabet’s stock performance compared to the S&P 500 over the past 12 months. Seven years later, in December 2016, it grew into an independent company within Alphabet and became part of its “Other Bets” unit, a more speculative addition to its core Google search engine, YouTube and cloud businesses. Collection of businesses. Its Waymo One ride-sharing service opened to the public in Phoenix in 2020. It launched in San Francisco in August 2023, but opened to everyone in the city three months ago. The paid service launched in Los Angeles in April. Now Atlanta and Austin are next (currently, only Waymo employees can ride in Austin). Currently, the Robotaxi service has about 700 autonomous vehicles on the road in its market. To date, Waymo has provided more than 2 million rides, and the pace is accelerating, which is good for revenue. Waymo announced last month that the number of paid rides per week doubled in August to 100,000 from 50,000 in May. Even before the recent Uber news, Morgan Stanley predicted that Waymo’s overall revenue in Phoenix, San Francisco, Los Angeles and Austin would grow 359% by 2024 and 109% by 2025. Adding Atlanta, a city of 500,000 people, is expected to further increase the growth rate. To be sure, Waymo is still small. TD Cowen expects Waymo’s gross bookings to reach $72 million by 2024, which analysts say is only 0.2% of Uber’s expected amount in the U.S. and only 0.5% of Lyft’s. Some Wall Street estimates are higher than TD Cowen’s (Bernstein, for example, is valued at about $100 million), but the conclusion is the same. Still, Waymo’s improving revenue outlook is good news for Alphabet investors, especially investors like Jim, who are tired of heavy losses in the “Other Bets” unit dragging down earnings from Google’s mature businesses. Other Bets has revenue of $1.5 billion in 2023 and an operating loss of $4.1 billion. Company-wide revenue and operating income were $307 billion and $84 billion, respectively. According to Alphabet, the majority of Other Bets’ revenue comes from its life sciences companies Verily and GFiber, and its WiFi and network connectivity division operates in parts of the United States. It’s difficult to determine Waymo’s specific financial health because Alphabet doesn’t detail the specific companies in its “other bets.” Waymo’s losses at this stage could be significant, given the high cost of developing and deploying self-driving technology. But so is its long-term potential to make money for investors. “This is arguably the most compelling long-term bet in terms of value creation,” RBC Capital Markets analyst Brad Erickson told CNBC. “There are billions of dollars there. Equity Value Creation Opportunity” New Financing Alphabet is taking advantage of this opportunity. In July, Alphabet announced a new multi-year investment in Waymo worth $5 billion. Waymo has also received external support in previous years. In 2020, the company received $3 billion in its first round of external financing from investors including venture capital firm Andreessen Horowitz and car dealer AutoNation. In 2021, it received another $2.5 billion in financing. “This new round of financing is consistent with recent annual investment levels and will enable Waymo to continue building the world’s leading self-driving technology company,” Ruth Porat, Alphabet’s then-chief financial officer, said in July. Waymo can’t do it alone Build a leading robotaxi business. Its deepening ties to Uber make that clear. When Waymo first launched in Phoenix, users ordered rides through the Waymo One app. That changed about a year ago when Uber added Waymo vehicles to its app. If an Uber user requests a ride within Waymo’s Phoenix operating area, they may be paired with a self-driving car. Passengers must confirm pick-up. In Los Angeles and San Francisco, the Waymo One app is the only way to summon self-driving cars. Atlanta and Austin will be different. In these cities, Waymo vehicles are only available through the Uber app. Unlike in Phoenix, Uber will also provide some fleet management services, such as cleaning and storage of vehicles. “We believe the fact that Waymo has chosen to enter new markets exclusively with Uber demonstrates the positive appeal of Phoenix and the speed of market advantage,” Bank of America analysts wrote in a note to clients on Monday. , partnering with existing ride-hailing companies such as Uber is critical to improving the economic viability of the business. Central to this perspective is an important concept, vehicle utilization, which measures the time a vehicle is serving passengers. Higher utilization means more customers are using the service, which ultimately translates into more profits to help cover the cost of depreciating vehicle assets. “These cars cost a lot of money to get on the road. So if they’re not generating revenue, that’s a very poor use of capacity,” Erickson said. “The way you can generate almost instant demand is to connect to Uber’s network.” That’s a big deal: Uber said it had 156 million monthly active consumers on its platform in the three months ended June 30. Technology, Aurora Innovation is known for its autonomous and semi-autonomous driving technology. Uber has also partnered with Waymo rival Cruise, which is owned by General Motors Co. Last month, Uber and Cruise entered into a multi-year partnership that will bring Cruise vehicles to the Uber platform as early as 2025. Robot taxi business. In that incident, a self-driving Cruise in San Francisco dragged a pedestrian about 20 feet after he was first hit by a vehicle driven by a human driver. The incident highlights the safety challenges facing autonomous vehicles, which remain a major risk to passengers, other drivers and investors in the industry. In fact, Waymo has encountered some minor troubles recently. In June, a Waymo self-driving car hit a utility pole while trying to pull over at low speed, prompting the company to recall all 672 vehicles. In February, Waymo recalled 444 vehicles after two Waymo vehicles crashed into a towed pickup truck in Phoenix. In both recalls, the company updated the vehicle’s software to address the issues. Earlier this year, U.S. safety regulators also launched an investigation into Waymo’s performance. Waymo claims its vehicles make roads safer, and in early September it released a data dashboard showing statistics on how its cars performed against a benchmark of human driver collision rates in Phoenix and San Francisco. In an interview with CNBC last week, Uber’s Khosrowshahi called Waymo a “leader” in self-driving technology and praised the company’s safety record. He also said more expansion of self-driving taxis on Uber’s platform is on the horizon. “I can’t predict when, but this is a technology that will scale,” he said. Analysts and investors are eager to see how Waymo’s ridership trends in new markets and whether the company’s expansion into more cities can be accelerated. Morgan Stanley analysts said that although Waymo has mapped more than 25 cities, it is unclear where Waymo will go after Austin and Atlanta. “Taking a step back, Waymo must accelerate if it wants to make meaningful progress and expand its reach within a reasonable timeframe,” Morgan Stanley analysts wrote in a report on September 5. Pace of city launches. Waymo spokesman Ethan Teicher declined to comment on any future plans, but said: “We are excited about the development of Waymo One and the positive feedback we are receiving from riders. “Tesla’s Oct. 10 robotaxi event will be a pivotal moment in the autonomous driving space in the near future and lead to a reexamination of Waymo’s place in it. What Tesla has to offer about the commercialization of its current robotaxi service Any details on the plans, including launch timing, will be particularly noteworthy. Competition is sure to come, but Waymo is already off to a good start (Jim Cramer’s charitable trust has long held GOOGL.) 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On May 15, 2024, a Waymo self-driving Jaguar electric vehicle was parked at an EVgo charging station in Los Angeles, California.
Patrick T. Fallon AFP | Getty Images
letterWaymo, its self-driving car unit, has finally kicked into high gear.