Autonomous Driving: Technology, Business Models, and Asymmetric Opportunities

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, 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 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 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’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.

Technology: Tesla vs Everyone Else

Subscribe to Premium to read the rest.