A Tale of Two Markets

This Week in The Autonomy Economy, The Road to Autonomy Index returned 1.32%, in the markets it was a tale of two markets on Thursday as investors digested the Bloomberg report of Tesla delaying the unveiling of their robotaxi until October.

The Bloomberg report sent Tesla’s stock tumbling by 8.44%, while Uber’s stock climbed 6.15% and Lyft climbed 4.64% respectfully. Why? It’s a classic case of the market not fundamentally understanding how robotaxi services operate and what the market will truly look like when robotaxis scale.

On Friday, you could say some sort of normalcy set in as Tesla rebounded 2.99%, Uber declined 1.50% and Lyft declined 3.10%, mostly wiping out their Tesla delay gains. What the market fails to realize is that Lyft is not in a position to benefit from autonomous vehicles at this moment.

In our opinion Lyft is a company looking for a home that can enable it to truly compete with Uber when robotaxis scale. Tesla, while they have an app with loyal users, does not have a TNC platform. In a May 14th Autonomy Insight we pondered the idea of Tesla buying Lyft with Harry Campbell, The RideShare Guy.

If Tesla bought Lyft, they could theoretically accelerate the launch of the Tesla Ride-Hailing Network. Watch the video with Harry below and let us know your thoughts by replying to this email.

Next week, what happens in the market? Who knows but we are starting to notice a trend. A day has not gone by over the past two weeks where robotaxis and autonomous vehicles have not been discussed on Bloomberg and CNBC.

This is a trend that is expected to continue as investors are once again taking a keen interest in the sector. When the autumn rolls around and the conference season begins in earnest we expect the chatter to accelerate.  

Tesla and Uber are The Road to Autonomy Index component companies

WHAT’S MOVING THE MARKETS | AUTONOMOUS VEHICLES

A Tale of Two Markets

On Thursday, July 11th, Bloomberg reported Tesla’s extremely hyped CyberCab / Robotaxi unveiling event has been delayed from August 8th until October. 

Prior to the report, Tesla’s stock had been on a rocket ship like trajectory, notching gains of more than $257 billion over an 11-day period, as the booster ignition turned on and the rocket known as Tesla accelerated towards space. Or to use the Wall Street Bets term “to the moon”.

Then reality set it in, the infamous Tesla delay occurred, sending the stock tumbling by 8.44%, while Uber climbed 6.15% and Lyft climbed 4.64%. 

This is where the tale of two markets comes into the picture. One part of the market believes Tesla is going to put Uber out of business, while the other part of the market believes that Uber will benefit from Tesla’s notorious history of overpromises and delays. 

Neither side of the market is fully correct, nor does the market, in our humble opinion, truly understand the business of robotaxis. Tesla will not put Uber out of business. On the contrary, Tesla could accelerate Uber’s growth when it deploys a robotaxi service. 

Uber will benefit from Tesla’s delays, but it is not for the benefit most investors think. The delays will simply give Uber more time to continue expanding their robotaxi partnership with Waymo to multiple cities, while potentially bringing new partners Cruise and/or Zoox onto the platform. 

As robotaxis scale around the world, they will eventually have a common denominator — Uber. Uber is poised to become the platform that enables autonomy to scale. Open your Uber app, enter your destination and order either a robotaxi or a human driven vehicle, it’s that simple.

If the wait time for a robotaxi is more than five minutes, Uber can automatically dispatch a human driven vehicle. Giving the company a unique competitive advantage as robotaxi fleets are small compared to the Uber driver network at this time.

It’s this asset-light hybrid model that will enable Uber to accelerate their growth as robotaxis scale. It was not always this way, but this changed on December 7, 2020 when Uber sold Uber ATG to Aurora. 

As part of the transaction, Uber became Aurora’s largest shareholder (as of May 8, 2024, Neben Holdings, LLC, a wholly-owned subsidiary of Uber owns 27.9% of Aurora) and shortly after the transaction closed, Uber CEO Dara Khosrowshahi joined the board of Aurora. 

With Mr. Khosrowshahi serving on Aurora’s board, he is gaining strategic insight into autonomy and the autonomous vehicle/truck industry that he might not otherwise have had. Insight that in our opinion will further accelerate the growth of both the Uber and Uber Freight platforms. 

Without owning autonomous vehicle / truck assets, Uber is positioned to become the Visa / Mastercard of autonomy as they will own and operate the platforms, not the assets. 

This is what investors do not seem to fundamentally understand about Uber. If you watch CNBC, you understand. Uber is a growth business and a business that has an extremely bright future as autonomy scales because it’s a platform.

Remember, without a platform, autonomy will not scale. Uber has that platform and so does Tesla. When Tesla commercializes their robotaxi service, they will be able to expand the Tesla app and offer ride sharing. 

No need to download a new app, if you own a Tesla, you already have the app. But building the routing algorithms and getting enough vehicles on the road to ensure a quick pickup is another story. 

Our take: Do your research, do not follow the headlines. They tend to be misleading. Autonomy scales when there is a platform to enable its growth.

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

WHAT’S MOVING THE MARKETS | DEFENSE

Scaling SensorPods to Defense Applications

Kodiak is building a dual-purpose business for the commercial and defense markets. Today, Kodak’s autonomous trucks are actively hauling goods on the nation’s highways while they work diligently on developing autonomous ground vehicles for high-risk military missions.

The common denominator that connects both businesses is their patent-pending SensorPods. SensorPods have enabled Kodiak to scale the Kodiak driver from highways to off-road defense applications. 

From a tactical military standpoint, military personnel will be able to place backup SensorPods strategically in theater in an effort to limit the downtime of autonomous vehicles in adverse situations. 

If one SensorPod gets shot by the enemy, it can be replaced in the matter of minutes by connecting a few bolts and wires, eliminating the need for a specialized technician. The same logic applies to the commercial SensorPods.

SensorPods increase operational efficiency for both on and off-road applications. They could very well be Kodak’s secret sauce as the company scales both commercial autonomous trucking operations and defense applications.

Our take: There is a very real possibility that Kodiak could license their SensorPod technology in the future. If that was to happen, Kodiak could add a 3rd business to their operations — licensing.

WHAT’S MOVING THE MARKETS | AUTONOMOUS VEHICLES

Chinese Government Goes All-In On Autonomous Vehicles

The Chinese government has gone all-in on autonomous vehicles. What is driving this strategy remains unconfirmed, but the speed at which robotaxis are being deployed in China is mind-numbing.

The speed of deployments and expansions leads to one questioning what is vaporware and what is real. What is real is that the government of China is all-in on autonomous vehicles.

What is not clear, is the tech real? It’s a conundrum that both investors and the public face in similar ways. Would you trust your child to ride in an autonomous vehicle that might be vaporware? If you are an investor, are you concerned that your investment might evaporate?

These are the type of questions that one has to ponder as little is known about the true state of autonomous driving technology developed in China. What is known is that the government of China views autonomous vehicles as an industry that it can come to dominate in a similar fashion to manufacturing.

The takeaway is very clear, the United States has a choice to make. Lead and usher in the future of the automotive business or risk once again becoming beholden to China.

Our take: “History Doesn't Repeat Itself, but It Often Rhymes” – Mark Twain.

WHAT’S MOVING THE MARKETS | AUTOMATION

Automating Fast Casual and Fast Food Restaurants

Autonomy and automation is not limited to vehicles and trucks. It is a technology that is going to impact every single industry and eventually become an economy that we call the autonomy economy.

Industries that have historically struggled with rising labor costs and shortages will be the first industries to embrace and actively deploy automation. We are now seeing this play out in the fast casual and fast food industries as companies such as Chipotle, Sweetgreen and White Castle introduce automation into the commercial kitchen.

The effort to automate the commercial kitchen is being led by Chipotle, Sweetgreen and Kernel, a startup led by Chipotle founder Steve Ells. 

Sweetgreen based in Los Angeles, California is accelerating plans to expand automation in their restaurants. Current plans call for half of it’s new restaurants to have automation. The timing of this is not a coincidence nor is it a validation that the tech is ready to scale, it is simply related to cost. 

On April 1st (this is not an April Fool’s joke), a new California law went into effect that raised the hourly minimum wage for fast food workers from $16 to $20 an hour. The rise in wages has led to thousands of jobs being lost, a decrease in hours for workers and fast-food franchise owners downsizing their operations in the state.

The makings of an economic calamity are underway in the California fast casual and fast food industries. The solution to save businesses and jobs is automation. 

Our take: The time to embrace automation is now. Automation will have a positive impact on the restaurant industry. Automation will create jobs, encourage investment and streamline restaurant operations.

PIQUING OUR INTEREST

Bank of America Maintains Underperform Rating on Luminar Bank of America has maintained their Underperform rating on Luminar ($LAZR) as they think the growth trajectory will be slower than consensus expectations and BofA thinks estimates are too high in the outer years.

HSBC Downgrades Tesla to Sell HSBC analyst Joseph Spack has downgraded Tesla ($TSLA) to sell from neutral and put a $197 price target on the stock. As part of the downgrade, Mr. Spack estimated the FSD / robotaxi business to be worth $18 billion. He does not see a launch of the U.S. robotaxi business this decade citing regulatory, consumer and technology hurdles.

Being Held Accountable In San Francisco A woman went around town slashing tires of Waymo vehicles and it was all caught on camera. 17 vehicles later, the woman was caught and arrested.

NATSEC100 Silicon Valley Defense Group’s annual leading venture-funded, national security-focused and dual-use startups list was released this week. The Trusted AI & Autonomy category accounted for 25% of the list with Kodiak appearing on the list for the first time at #98.

SOCIAL BUZZ | AUTONOMOUS VEHICLES

Scaling a Robotaxi Business

Scaling a robotaxi business is hard. An anonymous X account known as TechStockFundamentals posted thoughts shared from a contact who worked at Waymo about scaling a robotaxi platform.

Our take: We do not yet know how a robotaxi business is going to scale or ultimately what the business models will be at scale. What we do know as this tweet points out, it is a hard business.

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

SOCIAL BUZZ | AUTONOMOUS VEHICLES

Another One Bites The Dust

And another one gone, and another one gone that could become the trend if XPeng follows Tesla’s lead and drops LiDAR as they shift to a pure vision camera system. The shift away from LiDAR is being driven partly by cost and the vast improvements that cameras have made over the years. 

Is a camera-only approach the right approach? That remains to be seen, but an approach that takes into account economics of the business where performance is not sacrificed is the right approach. 

Our take: Who’s next to drop LiDAR? If you combine the market caps of pure-play LiDAR companies (Aeva, AEye, Hesai (ADR), Innoviz, Luminar, Ouster) you get a combined market cap of $2.431 billion. The market is telling us that LiDAR is not a standalone business. Is the highly advanced auto manufacturers industry with personally owned autonomous vehicle ambitions telling us LiDAR is no longer needed?

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 July 8th, The Road to Autonomy Index returned 1.32%, the S&P 500 returned 0.87% and the NASDAQ 100 declined 0.30%. The Road to Autonomy Index outperformed the S&P 500 by 0.45% and outperformed the NASDAQ 100 by 1.62%.

Year to Date (YTD), The Road to Autonomy Index has returned 17.25%

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LATEST PODCAST & INSIGHT

• The Dawn of Affordable Robotics: How Vayu is Revolutionizing Autonomous Systems (July 9, 2024), A Conversation with Anand Gopalan, CEO & Co-Founder Vayu Robotics

• Supervised Autonomy Solves Labor Shortages and Boosts Safety, A Conversation with Vinay Shet, Co-Founder and CEO of Teleo (July 8, 2024)

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