Car Insurance Continues To Be Inflationary

This Week in The Autonomy Economy, The Road to Autonomy Index returned 5.48%, car insurance continues to be inflationary, California State Senator Dave Cortese is once again trying to ban autonomous vehicles in California and Chipotle continues to expand Chipotlanes.

While inflation showed signs of slowing in the latest CPI (Consumer Price Index) report, the CPI motor vehicle insurance index rose 1.2% in July, following a 0.9% increase in June. 

Over a 12-month period, motor vehicle insurance has increased 18.56%. The last time car insurance rates rose this high was 1976. With rising car insurance rates, Uber and Waymo have opportunities to expand their ridership as consumers look for alternative means of transportation.

As Waymo expands in both Northern and Southern California, the company is providing a lifeline to those individuals who have either defaulted on their car loans, turned in their vehicles or simply opt-ed not to drive because of the staggering car insurance costs. 

Yet, with this economic reality, California State Senator Dave Cortese is preparing to re-introduce SB 915 that would effectively ban autonomous vehicles in California.

Banning autonomous vehicles in California would lead to higher unemployment (currently 5.20% in California as compared to the national average of 4.3%), a larger state budget deficit (currently $68 billion) and a further acceleration of companies and residents leaving the state. 

California’s economy is facing economic headwinds. Those headwinds will only get stronger if autonomous vehicles are banned. Autonomous vehicles are good for California’s economy. 

Autonomous vehicles are already creating jobs in the state and they will continue to create jobs, as long as they are not banned. Autonomy is an economic engine and California has the opportunity to tap into that engine.

Uber and Waymo parent Alphabet are The Road to Autonomy Index component companies

WHAT’S MOVING THE MARKETS | INSURANCE

Car Insurance Continues To Be Inflationary

The July 2024 CPI (Consumer Price Index) was released on Wednesday, August 14th. Inflation rose 0.2% after a decline of 0.1% in June. Over the last 12-months, inflation rose 2.9%, bringing inflation closer to the Fed’s target of 2%.

As inflation appears to be holding steady, the general consensus is that the Fed will begin to cut interest rates before the end of the year. While a rate cut(s) appear to be on the horizon, motor vehicle insurance continues to be inflationary. 

The CPI motor vehicle insurance index rose 1.2% in July, following a 0.9% increase in June. Over a 12-month period motor vehicle insurance has increased 18.56%. The last time car insurance rates rose this high was 1976. 

Inflationary car insurance is a tax on the consumer and it is having negative economic consequences. Over the last year, approximately 8.0% of auto loan balances transitioned into delinquency, the highest level since 2011.

Currently 4.43% of all auto loans are delinquent—the highest level since Q2 2021. Factor in rising consumer credit card debt which rose $27 billion to $1.14 trillion in Q2 2024 and the picture becomes even clearer. 

The consumer is suffering under the burdens of high inflation, and they are resorting to debt to cover their daily expenses as they continue to feel the pinch of high everyday grocery prices. 

While the consumer economic picture is trending in the wrong direction, there is opportunity brewing on the horizon for both the autonomous trucking and autonomous vehicle industries. 

The autonomous trucking industry should come together and host an Autonomous Trucking Grocery Store Day where everything was brought by an autonomous truck. Lower the price of every item in the store to reflect the savings that autonomous trucks can have on consumers wallets.

A strategy like this would win the hearts and minds of consumers, as it would have a direct impact on their wallets. While unions push for high labor costs (which are inflationary), the autonomous trucking industry should advocate for autonomy as it lowers costs (lower inflation). 

Inflation combined with an increase in motor vehicle crashes, new vehicle technologies/components and rising labor costs have led to increased car insurance premiums. 

Elevated car insurance premiums are a gift for Uber, Waymo, and Cruise. The higher the car insurance premiums rise, the more consumers are going to opt to sell their cars, turn in their leases early and switch to another form of transportation that is not a tax on their wallet. 

The other major beneficiaries of rising car insurance premiums will be companies that sell personally owned autonomous vehicles with insurance bundled into the monthly payment. At this time, the companies best positioned to act on this opportunity are GM and Tesla. 

For the consumer, economic history, unfortunately, points to a future where car insurance premiums are not going to dramatically decrease—they are going to hold steady. Since 1985, the only time car insurance premiums drastically decreased was during the early days of the covid pandemic. 

Sometimes a bad economic situation turns into a business opportunity. The opportunity to grow autonomous vehicle and truck businesses exists today. The only question is, who is going to capitalize on the opportunities presented by the market? 

Our take: The higher car insurance premiums rise, the more opportunities will become apparent for autonomy to be deployed will continue to arise.

Waymo is currently ranked #1 with a bullish outlook on the AUTONOMY LEADERBOARD in the autonomous vehicle category.

Cruise is currently ranked #2 with a positive outlook on the AUTONOMY LEADERBOARD in the autonomous vehicle category.

Tesla is currently ranked #1 with a bullish outlook on the AUTONOMY LEADERBOARD in the personally owned autonomous vehicle category.

Uber is currently ranked #1 with a bullish outlook on the AUTONOMY LEADERBOARD in the software platforms category.

Cruise parent GM, Tesla, Uber and Waymo parent Alphabet are The Road to Autonomy Index component companies

WHAT’S MOVING THE MARKETS | AUTONOMOUS VEHICLE POLICY

If at First You Do Not Succeed Try Again

That is the motto that California State Senator Dave Cortese (D-San Jose) is following as he is working to once again re-introduce legislation that would allow local jurisdictions to have control over autonomous vehicles, effectively banning them in California. 

Why re-introduce SB 915 again? Two reasons. One: State Senator Cortese is up for re-election and Two: Unions are his largest donor base. In politics, money talks and it is very obvious that State Senator Cortese’s decision to re-introduce a piece of legislation that would harm California’s economy is being driven by the unions. 

In a state that prides itself on being progressive, it is sad when a member of the California State Senate puts the interest of donors over the health of his state’s economy. California’s economy is strained as it faces rising unemployment, a growing budget deficit ($68 billion) and population outflows.

Over the last three years, California has recorded an outright decline in its population, the first sustained drop since 1850, the year it became a state. It’s not just residents that are leaving, businesses are leaving as well. 

Most recently Chevron announced they are moving to Texas on August 2nd. For over 145 years, Chevron was based in California. Toyota left, Tesla left, Oracle left, could Wells Fargo or Visa be next? Or perhaps an autonomous vehicle or truck company? 

Anything is possible as California’s fiscal mismanagement, high taxes and over-regulation makes it very enticing to relocate to Texas.

As of August, California currently has a 5.20% unemployment rate, the fourth highest in the country behind D.C., Nevada and Illinois. The U.S. average unemployment rate is 4.3%—0.9% lower than California.

Ban autonomous vehicles, over-regulate AI and California will once again claim the top spot for the highest unemployment rate in the country, a title that the state last held in June 2024. 

Let us not forget that a leopard can't change its spots.

Our take: Autonomy is good for the economy. Autonomy will lower inflation and create jobs. California legislators have a decision to make; whose interest comes first? California’s economy or special interests? 

WHAT’S MOVING THE MARKETS | INFRASTRUCTURE

Chipotlanes: The Future of Drive-Through Lanes

Chipotle ($CMG) first started to think about drive-through lanes in 2018. Now there are over 800 Chipotlanes (1 in 4 restaurants). In Q2 2024, Chipotle opened 52 new company-operated restaurants, of which 46 included a Chipotlane. 

For the year, the company is aiming to open a total of 315 new restaurants with 285 of them having a Chipotlane. The big difference between a Chipotlane and a traditional drive-through lane is mobile pre-ordering.

Restaurants with Chipotlanes have sales 10% to 15% higher than those without. With higher margins and 80% of future restaurants expected to have a Chipotlane, Chipotle is actively preparing for the future of autonomy.

Soon you will be able to order a burrito while riding in an autonomous vehicle, schedule a pickup time and pick it up, all without having to get out of the vehicle. It will be as simple as adding a stop to your journey.

Our take: Chipotlanes were built for the future of autonomy.

PIQUING OUR INTEREST

WeRide into an IPO Prospectus WeRide’s F-1 clearly lays out the company’s autonomous driving ambitions with a side of hubris that is reminiscent of the SPAC craze that ended in misery. In the prospectus, WeRide claims that they are “The only company that offers commercialized L2-L4 Full Range autonomous driving solutions”. Sometimes you just wonder.

Delivering ShakeShack Autonomously with Sidewalk Bots Serve Robotics ($SERV) announced a partnership with Shake Shack to deliver food via autonomous delivery robots when ordered on the UberEats platform in select LA neighborhoods.

Waymo is Considering Opening the Service to Teenagers Soon teenagers might be able ride in a Waymo without their parents tagging along if Waymo moves forward and opens the service to minors.

Scaling Underwater Autonomous Vehicles Anduril is scaling up production of their Dive-LD autonomous underwater vehicles with a new factory in Rhode Island as The Pentagon has selected the company for the Replicator program.

SOCIAL BUZZ | AUTONOMOUS VEHICLES

Look Ma, No LiDAR

The dominance of LiDAR continues to erode every single day as companies are continuously testing autonomous driving solutions that do not rely on LiDAR. 

In 2019, Elon Musk famously said "LiDAR is a fools' errand. And anyone relying on LiDAR is doomed”. Mr. Musk could be correct, as the market continues to gradually shift away from LiDAR. Nuro is just the latest example. 

The shift away from LiDAR is being driven partly by costs, reliability, maintenance and regulatory concerns. While LiDAR will still play a role in certain autonomous driving applications, the days of LiDAR being the dominant sensor for autonomous driving is coming to an end. 

To quote Benjamin Graham: “In the short run, the market is a voting machine but in the long run, it is a weighing machine”. The market has voted as a basket of publicly traded pure-play LiDAR companies ($LAZR, $INVZ, $LIDR, $HSAI (ADR), $OUST) have declined 43.31% YTD, while the NASDAQ 100 has returned 15.94% YTD. 

The market is now acting as a weighing machine as it is accurately assessing the fundamental value of LiDAR.

The combined market cap of this basket of stocks is $1.466.50 billion. To put this into perspective, Magna has more cash on hand ($1.517 billion) than the combined market cap of this basket of pure play LiDAR companies.

Our take: Something is cooking at Nuro. We continue to ponder the idea of Nuro licensing their autonomous driving stack.

Magna is a The Road to Autonomy Index component company

SOCIAL BUZZ | AUTONOMOUS VEHICLES

Waymo is Taking Another Road Trip

As the summer begins to come to an end the brisk fall winds prepare to return in the north, Waymo is actively planning their next road trip. On this trip, Waymo is heading to Truckee, CA; Upstate New York; and across Michigan–from the Upper Peninsula to the metro Detroit area.

Cold winds, rain and snow will greet the Waymo driver as it hits the road this fall.

Our take: It’s only a matter of time until Waymo expands into more harsh weather environments.

Waymo is currently ranked #1 with a bullish outlook on the AUTONOMY LEADERBOARD in the autonomous vehicle category.

Waymo parent Alphabet is a The Road to Autonomy Index component company

THE ROAD TO AUTONOMY INDEX WEEKLY PERFORMANCE

The Road to Autonomy Index® is a high-definition lens into the emerging world of autonomous vehicles and trucks. 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 August 12th, The Road to Autonomy Index returned 5.48%, the S&P 500 returned 3.93% and the NASDAQ 100 returned 5.38%. The Road to Autonomy Index outperformed the S&P 500 by 1.55% and outperformed the NASDAQ 100 by 0.1%.

Year to Date (YTD), The Road to Autonomy Index has returned 11.46%

Follow The Road to Autonomy Index on Apple Stocks | Google Finance

The Road to Autonomy Index Component Companies

For more information on The Road to Autonomy Index and to learn about licensing and marketing opportunities, please email [email protected]

LATEST PODCAST

• The Future of Battery Recycling: Closed Loop Ecosystems (August 13, 2024), A Conversation with David Klanecky, CEO, Cirba Solutions