To The Moon

$Mobileye Global Inc.(MBLY)$ ’s Gambit

Mobileye is going to own robotaxis, which is a big risk.

Mobileye made one of the most surprising announcements in the market this week.

Instead of waiting for customers to adopt its Level 4 robotaxi software and hardware solutions — continuing the modular business model it’s been using for years — Mobileye is making its own robotaxi vehicle and ride-sharing app.

Mobileye isn’t abandoning its old business model, but it is bolting on a high-risk vertical integration model.

Upon further review, this makes a lot of sense, even if it’s not being done from a point of strength. Mobileye’s current business model is selling autonomy hardware and software to automakers, which is ultimately reliant on OEMs for demand.

And those OEMs may not have your best interests in mind. We’ve seen they’re dragging their feet in autonomy, letting Waymo and others take the lead.

Hence, Mobileye decided it was time to take matters into its own hands.

Mobileye today announced plans to expand its robotaxi activities beyond supplying self-driving technology and into full ownership of an autonomous ride-hailing business. The new initiative, set to launch in a U.S. city in 2027, marks a significant evolution of Mobileye's strategy, combining its industry-leading autonomous driving capabilities with fleet operations, rider services, and mobility management into a single vertically integrated offering. The effort adds to Mobileye’s existing business model as a supplier of autonomous-driving technology to automakers and mobility providers worldwide, creating a new operating business while continuing to support customer deployments.

Today, Mobileye Drive serves as a standalone self-driving system that is being integrated into partner programs. Under the new planned initiative, Mobileye will extend its role across the entire robotaxi value chain, combining Mobileye Drive with its Moovit subsidiary’s Mobility Platform and consumer-facing applications, multi-modal trip planning, AV mission control, fleet-management technologies and integration with teleoperation infrastructure.

The initiative does not alter Mobileye’s commitment to supplying Mobileye Drive to automakers, mobility operators, and other customers. Rather, Mobileye views direct robotaxi operations as a complementary path to market that can accelerate deployment, generate operational learnings, and further demonstrate the capabilities of the Mobileye Drive platform at scale. The company expects its customer-driven and directly operated robotaxi programs to advance in parallel.

Mobileye is planning to prepare an initial fleet of about 100 vehicles targeted for deployment in a major metropolitan U.S. market beginning in 2027. The deployment is planned to be phased throughout the year and is intended to validate the operational model under fully driverless conditions. Following successful operation of the initial fleet, Mobileye plans to scale the business substantially, targeting approximately 17,000 vehicles over the following five years.

Mobileye

To back up for a moment, Drive is Mobileye’s robotaxi solution for automakers, and the idea was that it is a turnkey solution to get into robotaxis, rather than spending billions to build the technology themselves.

Vertically integrating into robotaxis while also saying they’ll sell Drive to customers who want it is a high-risk move, but it might be the right one given the slow adoption of Drive by OEMs.

The question is: Will it work?

The New Business Model

The release above explains that Mobileye views this as an add-on to the business. They’re still hoping OEMs will adopt their solution at scale, but Mobileye is building a proof of concept.

The analogy I think of is Google making phones, but also licensing Android to other smartphone manufacturers. Google provides a proof of concept with its own devices, leverages its cost of developing the operating system across other manufacturers, and those manufacturing customers give their users access to a familiar ecosystem.

Mobileye isn’t giving Drive away like Android is, and this isn’t an operating system that consumers interact with like a smartphone, so the analogy isn’t perfect. But with this robotaxi launch, Mobileye is proving the concept and will also take on some of the safety and regulatory burden that automakers don’t want.

They’re leading the horse to water…

What Mobileye Is Doing

As I understand it right now, here’s what falls in Mobileye’s purview with the robotaxi strategy.

• Designing AV software & (some) hardware: This is largely complete, as I’ve shown below.

• Own vehicles: This is a new business for Mobileye, and for now, the company will own vehicles on its balance sheet.

• Build a ride-sharing app: The theory is that a bunch of AVs driving around town during testing will get enough attention to build local buzz and drive adoption. Waymo proved this out, but is it replicable?

  • Mobileye also has the option to plug into demand sources like Uber and Lyft. From what I can tell, management isn’t saying this is the plan, but is also leaving options open.

In theory, Mobileye can get to market relatively quickly. Drive has been in testing for some time in the U.S. and Europe, and it’s a Waymo-like sensor suite that’s familiar to users and regulators. The cameras look like this:

Radar adds a redundancy that can “see” the world when cameras can’t, like in fog, glare, and snow.

And lidar helps create an accurate map of the area.

Mobileye thinks the technology is ready to go from testing to commercial launch, and vertically integrating is now part of that strategy.

What Mobileye Isn’t Doing

Importantly, Mobileye is not becoming an auto manufacturer. They haven’t disclosed who will manufacture vehicles, but this will be a retrofitted vehicle like a Waymo today or even a Lucid/Nuro vehicle.

If this first launch is successful, we could see hardware be more deeply integrated into the design, but I’m expecting this to look like the current generation Waymo, which has hardware stuck on a Jaguar i-Pace.

Mobileye also won’t be maintaining vehicles.

Management said an ecosystem of businesses ready and willing to operate, clean, and maintain vehicles is already popping up, and they’re going to leverage that.

It’s a strategy that makes sense on paper.

Pushing the Ball Forward

Reading into the announcement, I get the sense that Mobileye is frustrated with the speed at which partners are bringing autonomous solutions to market.

Mobileye built a robotaxi solution with the “build it, and they will come” mindset, and OEMs…didn’t come.

VW has been slow to expand its autonomy subsidiary MOIA, and the VW Buzz vehicle that VW/MOIA are using is now discontinued.

Holon continues to be mentioned as a key partner, but this is still a startup.

Holon concept vehicle.

The big U.S. automaker announcement earlier this year is Surround ADAS, not Drive, so even wins aren’t pushing robotaxis forward.

In an interview yesterday, Mobileye’s Chief Communications Officer Dan Galves said OEMs have pulled back on next-gen investment. Huge writedowns in EVs for nearly every OEM have made it hard to push for the next big investment.

And Tesla’s extremely slow rollout of robotaxis in Austin, where there are a few dozen vehicles operating a year after launch, doesn’t make the case that this is something they need to chase right now.

We also don’t yet see evidence that consumers are willing to pay for anything close to Level 4 autonomy.

So, decisions are pushed off.

Concept vehicles stay as concepts.

And potential revenue becomes delays.

Mobileye built a technology that it thought OEMs would need and desire, and had the right business model to be the best and lowest cost solution for OEMs to use without spending billions on developing technology themselves.

But demand never came.

So, as Mobileye watches Waymo push forward with robotaxis that have a similar design and capability, Mobileye finally decided to push the ball forward itself.

If you won’t do it, we will!

Why Mobileye Sees Growth in AVs

We don’t know exactly what the economics of AVs will look like, but comments from management indicate the numbers can get very large very quickly.

In the traditional ADAS market, Mobileye is making less than $100 per vehicle, selling a chip and software.

With robotaxis, the company expects to recognize $70,000 to $80,000 in revenue in the first 4-5 years through a combination of upfront revenue and revenue sharing.

Full ownership could mean $100,000 in annual revenue per vehicle. If that sustains, even a manufacturing cost of $100,000 could lead to a payback period of only a couple of years.

The ability to generate that much revenue per vehicle is something Mobileye needs to push forward. To generate the revenue that a single AV can, Mobileye would have to be in 700-1,000 vehicles.

And keep in mind, Mobileye has already done the work to develop Drive technology. That’s a sunk cost until vehicles hit the road.

Based on Mobileye’s state plan, at 17,000 vehicles in 5 years and $100,000 in revenue per vehicle, that’s $1.7 billion in incremental revenue for Mobileye. It nearly doubles the size of the business!

Again, this is a big growth opportunity, and if OEMs don’t take it, Mobileye will.

Downside vs Upside

The upside for Mobileye is clear. The company has a market cap of just $7.1 billion with cash on hand of $1.3 billion, so it has the technology and balance sheet to build a robotaxi business on its own.

But this isn’t a market without enormous risks. Uber recently outlined their partnerships in autonomy, and there are plenty of players in both hardware and software to compete with.

In time, I still see autonomy being commoditized by all of these competitors.

This is the competitive landscape Mobileye is entering. It may have advantages in terms of data collection (from millions of vehicles), stage of development, and costs, but everyone is chasing Waymo. And autonomy is existential for companies like Lucid, Rivian, Pony, and WeRide, to name a few.

I believe in the future of autonomous vehicles, but business models matter. Mobileye is taking a big risk shifting business models mid-stream.

I get why they’re doing it, given how slowly OEMs are moving to adopt more advanced systems, and it seems the robotaxi business is passing them by.

This is a big gambit, and while it may be the right thing to do, it’s not a guaranteed win for Mobileye.