Will I ride in a self-driving car this year?

Sascha: [00:00:03] From Equity Mates media, this is the dive, I'm Sascha Kelly, your host, and today we're talking about what promises to be one of the most revolutionary technologies of our lifetime. Self-driving cars have all imagined it and we've seen it in movies, a car that drives itself. You just enter your destination, sit back, relax and enjoy the ride. Maybe even drink a morning coffee. There'll be no more traffic accidents, no more drunk drivers, no more searching for a parking spot. And if you're anything like me, no more road rage. It sounds incredible. And according to some of the companies working on this technology, it's closer than we think. It's Tuesday, the 15th of March. And today I want to know, will I ride in a self-driving car this year to help me answer this and to talk me through some of the recent updates? I'm joined by my colleague and co-founder of Equity Mates, Alec Renehan. Alec, welcome to the dive. Alec: [00:00:56] Hi, Sascha, thanks for having me. Sascha: [00:00:58] So I feel like we talk about self-driving cars all the time. Yet every time I get in the car, I'm always doing the heavy lifting and I drive a manual, so I'm talking. I really do the heavy lifting. Is this ever sort of just like another taze? Is this the pot of gold at the end of the rainbow? I'm always going to be looking for it. Why are we talking about self-driving cars today? Alec: [00:01:18] So if you're living outside of America, it may be a little more of a tease, but I promise you it is getting closer. However, if you're listening in certain parts of America, self-driving cars are or are about to become a reality. We are talking about self-driving cars today because we've just gone through earnings season in America, and we've learnt some very interesting things from the companies that report it. Sascha: [00:01:48] OK, I want to park the self-driving cars for a moment. Pun intended. And I just want you to remind me exactly what earnings season is all about. Alec: [00:01:57] So earnings season is where publicly listed companies, those that trade on the share market, report their key numbers to the public. Sound bite: [00:02:04] Good afternoon, everyone, and welcome to Tesla's fourth quarter 2021 Q&A webcast. Alec: [00:02:09] How much they sold, how much they spent and what their remaining profit was. Some companies report every quarter. Others may report every six months. But however, frequently they report, these companies have a responsibility to tell the general public how they're going. And for us, earnings season is a great opportunity to learn more about these companies. Sure, we hear how they went, but we also hear about what they're working on and where they see the future. So in this recent earnings season, we heard a couple of fascinating notes about the race to develop self-driving cars. Sascha: [00:02:45] OK, so earnings season is basically like parent teacher night for grown up companies. So I'll leave that analogy with me, but I am intrigued. You've been deliberately vague about which companies you're talking about. Can you tell me? Alec: [00:03:00] So there are three companies that caught our attention this earnings season and are really leading the race for self-driving cars. Tesla, General Motors and Alphabet, a.k.a. Google. Sascha: [00:03:12] There's always a story with Elon Musk, so I want to start with Tesla. Overnight, Tesla CEO Elon Musk has challenged Vladimir Putin to a one on one duel. I'm not sure we have enough time to like, unpack what that's all about, but I'm sure his commentary on self-driving cars is going to be just as reserved and conservative. Update me Where is Tesla on their journey to self-driving? Alec: [00:03:35] Yeah, reserved and conservative has never quite been Elon's Waze. He's known for making big predictions with bold timelines. Sound bite: [00:03:43] My personal guess is that we will achieve full self-driving this year without a safety level significantly greater than Alec: [00:03:49] achieving Full Self-driving. This year will be a big feat, especially with some of the recent troubles Tesla has had with regulators. The US National Highway Traffic Safety Administration has investigated Tesla multiple times, three times in the last six months to be exact, and a lot of its focussed on the self-driving and autopilot features. The first of these three investigations looked at how Tesla's autopilot function works around crash scenes. Well, the second was about a feature in Teslas that let drivers play video games while the car is in motion. Maybe not the safest. Sascha: [00:04:28] Driving a car is like a real life video game, so I don't understand. Alec: [00:04:32] That's not how you should think about driving a car. But then the third investigation that was announced in February this year was over unexpected braking while in autopilot and driving at highway speeds. So a number of investigations focussed on the autopilot functionality. But the National Highway Traffic Safety Administration is also overseeing two recalls. So there have been a few issues on Tesla's journey. A full self-driving and convincing U.S. regulators to allow them to roll out Full Self-driving may be a big ask with these investigations ongoing and this recall just in the rear-view mirror. But Tesla's story is of achieving things thought impossible and achieving fully self-driving this year would be revolutionary for Tesla's business. Sound bite: [00:05:23] So over time, we think Full Self-driving will become the most important source of profitability for Tesla. But actually, if you run the numbers on robotaxi, it's kind of nutty. Alec: [00:05:33] But what might be the most amazing thing for Tesla is that Full Self-driving could be deployed with a software update, just like updating your iPhone. Unlike many of their competitors that will need to build new cars or retrofit existing cars with a whole bunch of hardware. Tesla has all the hardware built in there really now focussed on training the software that uses that hardware to be able to fully drive the car. And as they develop this software, this artificial intelligence to be smarter and better drivers and safer drivers. They push these out to the Tesla's cars with software, so Sound bite: [00:06:12] the cars in the fleet essentially becoming self-driving via software update, I think might might end up being the biggest increase in asset value of any asset class in Alec: [00:06:23] history. So, Sascha, forget the idea that a new car that you buy depreciates as soon as you drive it off the lot. Tesla owners may wake up one day and find that they now own a full self-driving robotaxi because of a software update. They've got pushed to them overnight. It really does start to blow the mind Sascha: [00:06:43] that absolutely blows my mind. I've always been incredibly jealous of anyone who owns a Tesla, and now I'm wondering whether it would be actually a great investment for myself. I can justify the cost. And it's not surprising because even though Elon Musk is, you know, you never know what he's going to say. He also, as you said, achieves incredible things. Let's leave Tesla for now, and let's turn our attention to the other two companies that you've been talking about Alphabet and General Motors, and we're going to talk about them right after this break. You're listening to the dive, I'm your host, Sascha Kelly. I'm joined by my colleague Alec Ren Ahan, and today we're discussing recent updates on the race to self-driving cars. Yes, we are full of car fans today. Before the break, we talked about Elon Musk and Tesla. And there's another two cars that are kind of vying for those final podium positions. Very different companies. One is a software company turning its hand to cars, and the other is a carmaker, heading the other direction and turning to software. So let's start with the fast, which is the software company Alphabet Alec. What are they doing? Alec: [00:07:54] So Alphabet owners of Google are in the electric car race through its subsidiary company Waymo, and Waymo has been leading the race for a little while. You could say it's in pole position. Sascha: [00:08:08] Someone's been watching drive to survive. Alec: [00:08:11] So since October 2020, Waymo has been offering a driverless taxi service to the public in Arizona, just like Uber. You could pull out your phone, open the Waymo one app and order a car. The difference is that Waymo's car has no driver Sound bite: [00:08:28] steering wheels moving seatbelts fastened. No one's behind the wheel. Alec: [00:08:33] Last year, Waymo expanded their operations to San Francisco. Unlike in Arizona, a driver still does need to sit behind the wheel in case something goes wrong. But they are today operating a robo taxi service in two cities. That's a pretty amazing feat. Now, the recent update from Waymo is that they have just received permission from San Francisco city authorities to start charging for self-driving rides. This is a key step in their evolution from a test programme to a real self-driving robotaxi business. You can really Sound bite: [00:09:08] build a sizeable ridesharing business if you set up operations here. Sascha: [00:09:12] So can I just check they've been running these as test cases and you haven't had to pay for them and then now about to start monetising it? That's correct. Oh my goodness. So Tesla thinks they're going to have fully self-driving cars by the end of the year. We're going to. People are just going to wake up and have robo taxis in their garages. Alphabet already has fully self-driving cars operating in two cities. So let's talk about maybe the most unexpected company in the mix the old school one, really, which is General Motors, not a company that came to my mind when I thought about cutting edge tech. I've got to admit, Alec: [00:09:44] yeah, I tend to agree. But to General Motors credit, they have seen the writing on the wall and are disrupting themselves. GM has invested almost $7 billion as part of a plan to build one million electric vehicles by 2025, but also in 2016 they acquired a start-up called Cruze, which was heavily focussed on building self-driving cars and on their recent earnings call. General Motors CEO Mary Barra celebrated a major milestone for Cruze. The self-driving car start-up would be opening the self-driving robotaxi service to the public in San Francisco. Sound bite: [00:10:27] This is the first truly driverless ride hailing service offered to members of the public in a dense urban environment. This major milestone brings cruise even closer to offering its first paid rides and generating. Alec: [00:10:39] GM expects Cruise to bring in $15 billion in revenue a year by the end of the decade. As this uber like robo taxi service is rolled out around America and then eventually the world now one other exciting note from Mary Barra as presentation was Cruise's partnership with Walmart. Sound bite: [00:10:58] Additionally, cruise continues to advance the strong relationship it has established with Walmart, where the team is making progress on driverless deliveries of groceries to customers every day. Alec: [00:11:09] So, Sascha, imagine a self-driving car delivering your groceries from the local grocery store as Cruz and Walmart deepen their relationship. Americans around the country won't need to imagine that anymore. Sascha: [00:11:22] I mean, that sounds very dangerous to me. I would definitely be ordering things all the time, and it's absolutely amazing. The fact that people living in San Francisco have now got the choice of two self-driving car ride hailing services is wild and almost an advertisement for itself in San Francisco, if you're interested in that kind of thing. OK, so give me a wrap up of the rest of the environment. Are there any other companies that we should be aware of or looking at? Alec: [00:11:46] So we've spoken about the big three. I think we'll call them in terms of the three companies leading the race for self-driving cars. But almost every car maker and so many start-ups are in the race in some way, shape or form. Almost every legacy established carmaker has either a unit working on it or an investment in the space. Honda, Mercedes, Nissan, Audi, Volkswagen, BMW, Toyota, Volvo, Ford all of these carmakers have achieved. Different levels of self driving, but none are really challenging these three front runners at the moment. Ford had an interesting trial in 2018 with Domino's Pizza to deliver pizza with autonomous vehicles, but they've since fallen behind the pack. Then there are a number of start-ups in this space, with names like Aptiv, nuTonomy and Zoox. Zoox is actually an interesting one. After being acquired by Amazon in 2020, they are now testing self-driving cars in three cities Seattle, Las Vegas and San Francisco. And just last week, they acquired a business building a strawberry picking robot. So watch this Space self-driving strawberry pickers soon. Sascha: [00:13:01] I can't say that those are two industries I ever would have put together as strawberry pickers and self-driving cars. Alec: [00:13:06] I think more and more what we're finding is self-driving cars are essentially just robots. We're going to see a lot more convergence between those kind of companies, robotics companies and then also warehouse automation companies. But if the first two categories are legacy automakers and then start ups, the third category, we should really be watching Chinese tech companies. Do you see that as a validation from investors for their focus on A.I., on autonomous vehicles? Sound bite: [00:13:36] I'm happy that the market has start Alec: [00:13:38] to pick up this kind of message, and there's probably five names to just keep in the back of your mind. Over in China, there are similarly in this race Auto X Baidu with their subsidiary Apollo Didi, Pony Dot, AI and Way Ride. Some of these names are testing. Others are still developing. But the big three as we speak in early 2022 Tesla GM and Alphabet. Sascha: [00:14:04] So I like the big question is am I going to be in a self-driving taxi by the end of the year? Alec: [00:14:11] Well, if you are willing to move to San Francisco, you could be 100 percent confident you could order a self-driving taxi by the end of this week. Sascha: [00:14:19] However, that is now the time to tell you I'd like to move to San Francisco. Alec: [00:14:24] The problem is you'd move to San Francisco, but no one can afford a house there. But we look at all these companies racing to be the first here to really commercialise and expand globally with self-driving technology, and we think it must be on the horizon. But these final technological hurdles that a lot of these companies are trying to work through will not be easy to jump over. Passing all the regulatory requirements to prove that self-driving cars can react as well as humans in those split second, traffic decisions may be difficult. Also, ensuring that these cars can drive well when traffic conditions are confusing, that may take time. So there have been bold predictions before. Business Insider in 2016 predicted that 10 million self-driving cars would be on the road by 2020. Sascha: [00:15:14] Well, that clearly didn't have. Alec: [00:15:15] That has come and gone. So I'm not going to fall into the trap and make a prediction today and tell you that sitting here in Australia, you'll be in a self-driving car by the end of the year. But one other thing to note. Even when self-driving cars on the road, people may not want to jump in. A March 2021 morning brew Harris poll found that 48 per cent of American adults would be somewhat comfortable in the passenger seat of an autonomous vehicle. And you can understand why. Looking at that empty seat and there's some videos on YouTube where you can watch it is quite unnerving. And if it takes time to convince users to use the service, it's going to take time for those services to expand outside of America and into other countries. So the two of us sitting here in Australia, it may be a bit of time before we see these robo taxis come to our shores. But trust me, Sascha: [00:16:13] it is on the way. I imagine that there is going to be a level of trust that I'm going to have to overcome to become comfortable with this situation. All right, Alec, I think that that's where we're going to leave it for today's edition of the dive. You've left me on a bit of a cliff-hanger, but who knows? Watch this space. Maybe I will be in a self-driving car by the end of the year. If there's a story that you want us to talk about or a question that you'd like answered, then contact us at the dive at Equity Mates dot com. The link to that email is in the show notes below. And of course, follow us on all the social media channels. Those details are there as well. Remember to write and review us and your favourite podcast app and subscribe so that every time we have a new episode, it's going to be right there in your feed the second it drops. Thanks so much for joining me today, Alec. Alec: [00:17:00] Thanks, Sascha.