To The Moon

$General Motors(GM)$ Cruise vehicles are back in the Phoenix area, this time with a human driver behind the wheel.

For now, the driver is fully in control and the vehicle is collecting data through its cameras, LiDAR, and other sensors. It’ll be a few months before people begin taking rides in an autonomous Cruise vehicle, but the vision of this becoming a big business is back on track.

Meanwhile, $Alphabet(GOOG)$ $Alphabet(GOOGL)$ Waymo continues to rack up over a half million fully autonomous miles per month and recently expanded in Los Angeles and Austin, TX. And Elon Musk announced a $Tesla Motors(TSLA)$ Robotaxi unveil on 8/8.

The autonomous driving business appears to have a real future, but where are the asymmetric opportunities today?

Autonomous Driving as a Business

There are technical challenges in autonomous driving, but I want to focus today on what we know about the available systems and what business models are being deployed.

On the business model side, two solutions are emerging.

1. Transportation-as-a-Service (TaaS): This model would completely disrupt the auto market by building a transportation-as-a-service business model. It’s Uber, but cheaper and autonomous.

   1. This is the path Cruise, Waymo, and Zoox are pursuing and it’s what $Uber(UBER)$ attempted to build before shutting down its autonomy efforts.

   2. The model would be to spend billions of dollars upfront to build the technology and fleet of vehicles in-house and charge on a per-mile basis.

2. Autonomy Licenses: The licensing model would incrementally add autonomous features to personal vehicles and offer autonomy as a service to individuals. The same model could be deployed as a license to other OEMs.

   1. This is Tesla’s model and is at least part of Mobileye, GM (Super Cruise), and $NVIDIA Corp(NVDA)$ ’s autonomous models. In Master Plan, Part Deux, Elon Musk discussed the idea of building autonomous vehicles, selling FSD as a subscription, and allowing customers to rent their vehicles as part of a robotaxi fleet. Musk has also mentioned interest in licensing FSD technology to other OEMs.

Selling transportation-as-a-service and selling autonomous software to individuals for a monthly fee are very different business models and this may ultimately be the most important battle in autonomy. Business models matter. 

I tend to think transportation as a service — which has been proven out by Uber — is a viable model while paying a monthly subscription to NOT drive your vehicle is less compelling. More questionable yet is getting paid a few dollars an hour to rent out your vehicle to an autonomous fleet operator.

https://asymmetric-investing.beehiiv.com/p/autonomous-driving