The Driverless Revolution in 2019 – Robo Taxis Make Their Way to Main Street

40,000 people in the United States are killed by a road accident each year. Driver-less technology could improve that number. The negative sentiment driving next to a driver-less car will slowly wane out and pundits anticipate self-driving cars will be the norm in years to come. Companies such as Alphabet’s Waymo and General Motors are leading the race to bringing driver-less technology to the forefront. There are really good books online that detail the technologies that will drive the world in the future such as Klaus Schwab’s “Shaping the Future of the Fourth Industrial Revolution.”
With over 10 million miles driven on public roads, Waymo has come a long way since the self-driving car initiative started in 2009. I vividly remember visiting Phoenix 4Q2018 and was excited to see Waymo’s self-driving car on the same road as I drove to the grocery store. At that point, I knew that the self-driving revolution has indeed arrived. Recently, Waymo announced the start of the Waymo One, a self-driving service similar to Uber and Lyft but without a human driver.

Waymo One recently became commercial in Arizona with plans to expand to other locations. The challenge self-driving cars will face is the skepticism over its safety. The autonomous Uber vehicle’s fatal collision with a pedestrian raised concerns in 2018 on how safe self-driving cars can really be. The true impact on safety will not be known till there are many test cases of self-driving cars on public roads. In 2016, there were 34,439 fatal motor vehicle crashes in the United States alone by vehicles driven by humans. If the self-driving revolution can decrease that number then that would be a major breakthrough.

Waymo’s potential value on Alphabet is at its early stages of quantification but analysts have valued it between $25 billion to $175 billion. Alphabet, a $721 billion company by market cap with a $13.06 diluted EPS, stands to benefit if Waymo’s self-driving service becomes a full success. The main benefit of the self-driving revolution to car companies is the increase in operating margins which stems from decreased operating expenses. With an improvement in operating margin, the company would be able to deploy the additional cash flow to other projects, buy-back shares, or increase dividends given to the shareholders.

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