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This week in the autonomy economy, The Road to Autonomy Index returned 4.21%, Waymo announced they completed over 700,000 autonomous rides in 2023 and the California Department of Motor Vehicles accused Tesla of falsely advertising “Full Self-Driving”.
The market for autonomy has changed a lot in 2023, some for the better and some for the worse. While the market has changed, there has been one consistency in the robo-taxi business, Waymo. Waymo continues to operate a successful robo-taxi business in multiple cities at a high-level.
With Waymo on track to surpass 1 million autonomous rides a year, the attention now turns to the business of Waymo. It’s a topic that we are focused on for 2024 and we are looking for Alphabet to offer more guidance in the coming quarters about the Waymo business.
Alphabet’s self-driving–car development unit, Waymo, is surely the most advanced in the country.
Heading into 2024, Waymo is the clear leader in the development and commercialization of autonomous vehicles. Waymo is poised to gain significant marketshare over the coming years as GM works to reboot Cruise.
Alphabet is a The Road to Autonomy Index component company
What’s Moving the Markets
Tesla said Full-Self Driving. California DMV Ignored. Until Now.
Who’s right? Who’s wrong? Who knows. On December 11th, The Los Angeles Times reported that the California Department of Motor Vehicles accused Tesla of falsely advertising “Full Self-Driving”.
This motion comes seven years after Tesla first introduced the term “Full Self-Driving”. It appears that the California Department of Motor Vehicles was waiting in one of their infamously long lines.
In a December 5th court filling that became public on December 11th, Tesla’s attorneys wrote the following in a notice of defense:
Claimant is therefore estopped from asserting the myriad false advertising claims in the FAA (“First Amended Accusation”) against Tesla because it knew of Tesla’s use of the brand names Autopilot and Full Self-Driving Capability and Tesla’s advertising of these packages for over five years and failed take any action. Tesla relied upon Claimant’s implicit approval of these brand names. Claimant is estopped from now attempting to hold Tesla liable for conduct that Claimant implicitly approved.
Our take: The California DMV appears to be under political pressure as Elon Musk ramps up his free speech efforts on X to the dismay of his political adversaries.
President Biden stood at a White House podium & stated that Elon Musk “is worth being looked at.”
When asked "How?", President Biden responded “There’s a lot of ways.”
There certainly are. The DOJ, FAA, FTC, NLRB, SDNY, & FWS have all taken action.
The FCC now joins them.
— Brendan Carr (@BrendanCarrFCC)
Dec 13, 2023
The advertising boycotts on X continue and they are having a negative impact on the company’s revenue. Bloomberg reported on December 12th that X is projected to generate $2.5 billion in 2023 ad sales, down from $5.1 billion in 2021, prior to the acquisition by Elon Musk.
Are the advertising boycott calls on X now extending to regulating Tesla’s marketing? Will the actions of X have a material impact on Tesla? We are unsure at this time, but we are monitoring the situation and the on-going investigations.
Tesla is a The Road to Autonomy Index component company
To The Moon
According to Bloomberg, SpaceX is in the process of selling insider shares at a $97 a piece in a tender offer valuing the company at $180 billion. If this valuation holds, SpaceX would be the world’s second most valuable startup behind TikTok’s parent company ByteDance which is valued at $268 billion.
SpaceX Valuation / Source: Bloomberg
Our take: Depending on the outcome of the 2024 Presidential Election and the IPO market late next year, a potential SpaceX IPO could happen in 2025. With SpaceX on track to book $9 billion in revenue this year and projected revenue of $15 billion in 2024, the launch of an IPO is getting closer to take off.
There Was Never a Bubble to Pop
In a December 13th story in Barrons, Al Root who covers the automotive sector for Barrons wrote an article titled; “The Self-Driving Car Stock Bubble Has Popped, Too”. The headline is catchy, but the fact is that there was never a self-driving car bubble to pop.
The public companies highlighted in Mr. Root’s story with the exception of TuSimple went public via SPAC during the depths of a low interest rate environment with excess consumer savings.
Consumers couldn’t travel freely, so they “invested” in stocks or as Dave Portnoy aka Davey Day Trader called them “stonks” during the depths of the everything rally.
This was 2021 and individual investors for the most part were simply chasing a trend, they were not investing. Investors were simply riding a wave uncertainty unsure when the wave would crash.
The Federal Reserve crashed the wave when they began to raise interest rates. At that point we learned who was swimming naked when the tide went out to paraphrase Warren Buffett.
There was never a self-driving car bubble in the public markets, there was simply a SPAC bubble.
Our take: SPACs were a bad idea that unfortunately became a trend.
Cruising in a Different Direction
On December 14th, Cruise announced that 900 employees were let go, roughly 24% of the workforce. This comes on the heels of GM dismissing 9 “key executives” including Chief Operating Officer Gil West, Chief Legal Officer Jeffrey Bleich, Government Affairs Head David Estrada and Prashanthi Raman Vice President of Global Government Affairs the prior day.
On the news GM’s stock rallied 6.65% to close at $36.08 as investors cheered the news. What GM investors fail to realize is that GM’s hopes and dreams for Cruise will now become a long distance memory.
Our take: GM is going back to the drawing board with Cruise. Dismissing Gil West in our opinion was a mistake and a clear indicator that GM has put all commercial plans on hold.
700,000 Trips and Counting
Thanks to our Waymo One riders for riding with us more than ever before this year. We can't wait for what's to come in 2024!
— Waymo (@Waymo)
Dec 13, 2023
On December 13th, Waymo (Alphabet) announced that the company successfully completed over 700,000 trips in 2023, equating to 126,800 hours of autonomous driving time. That is 347 hours a day for each day of the year.
It became very clear in 2023 that Waymo is the definitive leader in the robo-taxi market. As we head into 2024, look for Waymo to bring commercial operations online in Los Angeles and perhaps a few more U.S. cities. One which we believe to be Miami.
While the Miami economy is running hot with annual inflation rate of 7.4% as October according to the Bureau of Labor Statistics, individuals continue to move to Miami at a rate of 250 per day.
Which is concerning from an economic standpoint as the average Miami rental costs $3,200 per month (down from $3,743 in 2022) with the average weekly wage in Miami-Dade county being $1,528 equaling roughly $4,584 a month before taxes.
Factoring in a 2.5% unemployment rate, 1.2% lower then the U.S. average of 3.7% (November 2023) and a potential recession in 2024, Miami is heading for an economic hard landing if the trends continue.
Today it costs 15.4% more to live in Miami then the national average. In a recessionary environment the unemployment rate will increase, car insurance payments will stop, car loan payments will seize and an affordability crisis will take hold.
But how will the residents of Miami get around in this economic environment? Enter autonomous vehicles, an affordable, reliable, safe form of transportation.
In our opinion, the economists at Waymo know the data and have clearly grasped the opportunity to provide an autonomous robo-taxi service to the roughly 450,00 individuals who call Miami home.
Alphabet is a The Road to Autonomy Index component company
Tesla, a Multi-Trillion Dollar Robotics Company?
Tesla is a multi-trillion dollar robotics company in the making
— Whole Mars Catalog (@WholeMarsBlog)
Dec 13, 2023
That is what Tesla bull, Whole Mars Blog thinks and he just might be onto something. Tesla has two major businesses hiding in plain sight that can drive significant value to the business over time: Autonomy and Dojo.
Both businesses compliment each other giving Tesla the ability to compete with Amazon AWS, Google Cloud and Microsoft Azure for AI cloud computing market share. And with Alphabet’s Waymo and Amazon’s Zoox for robo-taxi market share.
In its quest to solve for autonomy, Tesla (TSLA, $249) has developed “Dojo,” a purpose-built supercomputer designed in-house to train the full-self-driving (FSD) system that sits inside every Tesla vehicle.
Our US Autos team — in concert with our Semiconductors analysts and numerous other AI thought leaders in Morgan Stanley Research — conducted an in-depth analysis of Dojo that led them to raise their TSLA price target to $400 (from $250), upgrade the shares to Overweight, and name TSLA their Top Pick.
They believe Dojo can open up new addressable markets — such as software and services revenue — while also accelerating the speed of AI training and lowering capex and energy usage. All told, they estimate that Dojo can add up to $500 billion to Tesla's enterprise value, expressed through a faster adoption rate in Mobility (robotaxi) and Network Services (SaaS).
In terms of potential catalysts for the market to gain greater understanding of Dojo and potentially unlock value, our team points to Version 12 of Tesla’s FSD system (likely by year-end) and Tesla's next AI day (early 2024).
With Tesla designing their own chips, the potential to lower Tesla’s spending and reliance on NVIDIA GPUs only accelerates.
We see Dojo as a way to develop TSLA’s AI-heavy AV approach while limiting reliance on external NVDA GPUs, but see external sales opportunity as limited at the moment.
Combing licensing FSD (Full Self-Driving) and Dojo and Tesla has the makings of two very big businesses.
We believe that Tesla’s FSD revenue is currently $1-3 bn per year, mostly from up-front license sales (currently $12K per year in the US market) that is generally a license attached to that vehicle for the life of the car. Tesla also offers a subscription of $199 per month.
We believe that Tesla’s software related revenue could be tens of billions of dollars per year by 2030 (mostly from FSD), and we show what the TAM could be with either a monthly subscription, or a one-time upfront purchase, although it could be a blend of both. These scenarios suggest that in an upside case FSD could account for tens of billions of revenue per year (and more if we consider licensing of Dojo or selling FSD to other OEMs).
We recognize there are scenarios beyond the range we show (e.g., upside cases given that Tesla aspires to sell 20 mn vehicles a year and could license FSD to other OEMs, and downside cases that are less positive from factors including regulatory constraints and/or software development challenges).
To illustrate how big a licensing business could be, note that Nvidia’s datacenter business is tracking to over $50 bn of revenue in 2024, and AWS to more than $100 bn in 2024, per GS analyst estimates.
RBC Analyst, Tom Narayan currently values FSD at $235 billion.
Over the coming decades, Whole Mars Blog could be proven right in his analysis of Tesla.
Amazon, Microsoft, NVIDIA and Tesla are The Road to Autonomy Index component companies
The Dawn of Autonomous Flight is Upon Us
We've successfully completed a series of flight tests that integrate uncrewed aircraft into controlled airspace with other piloted aircraft.
Thank you to our partners, including @Insitu_Inc, @CivilAviationNZ, @AirwaysNZ, Airways International’s AirShare, and @Tawhakijv!
— Wisk (@WiskAero)
Dec 4, 2023
We are on the precipices of autonomous flight operations. While autonomous flight operations are currently underway for both military and civilian drone applications, autonomous flights with humans are still years away. While still years away, Wisk is moving towards an autonomous future.
The company recently tested an uncrewed aircraft in controlled airspace with other piloted aircraft. This is a major milestone on the flight to autonomy.
When the first autonomous aircraft carrying a human passenger takes-off, one will look back in history in awe of the technical progress that has been made since Orville and Wilbur Wright first took flight on December 17, 1903.
In a December 11th research report titled Enter the Aftermarket Supercycle, William Blair Aerospace & Defense, Smart Cities Equity Research analyst Louie DiPalma wrote the following:
Boeing has new innovations in the pipeline that will allow it to take advantage of new aviation trends and maintain its leadership position. A key trend that Boeing is trying to take advantage of is the shift toward greater sustainability efforts and autonomous flight.
In June, Boeing acquired Wisk Aero from Kitty Hawk Corporation after having invested $450 million in the company in early 2022. Wisk Aero is an electric autonomous flying eVTOL air taxi manufacturer based in California.
While Boeing does not necessarily expect material impact from Wisk, there is increased optimism that Wisk’s success can educate the FAA on how to certify commercial airplane autonomy for future applications.
The dawn of autonomous flight is upon us. Over the next several decades, autonomous flight will become a mega-trend.
For those interested in aviation, I would highly recommend David McCullough’s The Wright Brothers book. (Amazon affiliate link)
The Road to Autonomy Index® / Weekly Performance
The Road to Autonomy Index® is a high-definition lens into the emerging world of autonomous vehicles. It is the world’s first and only pure-play index designed to measure the performance of the autonomous vehicle/truck market.
For the week of December 11, 2023, The Road to Autonomy Index returned 4.21%, the S&P 500 returned 2.44% and the NASDAQ 100 returned 2.93%.
The Road to Autonomy Index outperformed by the S&P 500 by 1.77% and outperformed the Nasdaq 100 by 1.28%.
The top performing stocks in The Road to Autonomy Index this week were:
Luminar returned 36.71%
Prologis returned 12.74%
Caterpillar returned 10.11%
The Road to Autonomy Index Performance - Week of December 11, 2023
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Latest The Road to Autonomy Podcasts
The Road to Autonomy podcast hosted by Grayson Brulte is a podcast featuring unconventional conversations about the future of mobility and the emerging autonomy economy. New episodes every Tuesday.
Future of In-Car Experiences
Mercedes-Benz EQS 580
Jana Breitkopf, Managing Director, Mercedes pay USA recently joined The Road to Autonomy podcast where she discussed how Mercedes pay is enabling the future of in-car experiences.
Listen on The Road to Autonomy | Apple Podcasts | Spotify
Thursday, December 14, 2023
Uber Freight: $18 Billion of Freight Under Management and Growing
Uber Freight
Olivia Hu, Head of Autonomous Trucking, Uber Freight recently joined The Road to Autonomy podcast where she discussed how autonomous trucking is going to complement and accelerate the growth of Uber Freight’s $18 billion of freight under management platform.
Listen on The Road to Autonomy | Apple Podcasts | Spotify
Tuesday, December 5, 2023
Uber is a The Road to Autonomy Index component company
Autonomous Trucking is a Big Business Opportunity
Daimler Autonomous Truck
Lee White, Founder & President, LM White Consulting joined The Road to Autonomy podcast to discuss why autonomous trucking is a big business opportunity and what the economics of that business will look like when autonomous trucks are operating commercially.
Listen on The Road to Autonomy | Apple Podcasts | Spotify
Tuesday, November 28, 2023
Subscribe to The Road to Autonomy podcast on Apple Podcasts | Spotify
All price references and market forecasts are as of the date that this newsletter has been sent. The Road to Autonomy is not providing any financial, economic, legal, accounting, or tax advice or recommendations in this newsletter. The information contained in this newsletter does not constitute investment advice and should not be relied upon to evaluate any potential transaction.
Inclusion of a security within The Road to Autonomy Index® is not a recommendation by The Road to Autonomy Indices LLC to buy, sell, or hold such security, nor is it considered to be investment advice.
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