“Tesla's long-awaited robotaxi service has finally hit the road. But rather than help justify the electric-car maker's sky-high valuation, it really highlights how underappreciated Google parent Alphabet might be for its own, much more advanced self-driving venture.
The robotaxi service Tesla launched in Austin, Texas, last weekend involves fewer than two dozen cars offering rides to handpicked adults in a small area of the city between the hours of 6 a.m. and midnight. The vehicles are Tesla's Model Y SUVs outfitted with the most robust version of the company's full-self-driving software. The purpose-built Cybercab that Tesla unveiled last year isn't expected to roll off production lines until at least sometime in 2026.
A small-scale launch, in other words. And not a lucrative one. Tesla is charging its initial riders only $4.20 per trip, which would barely cover the cost of the Tesla employee riding as a "safety monitor" in the passenger seat of the vehicles involved if that employee is making the Texas minimum wage of $7.25 an hour.
And yet, robotaxis are among the moonshots supposedly underpinning Tesla's $1.1 trillion market capitalization. That is more than the combined market cap of the world's next 20 automakers by market value, according to data from S&P Global Market Intelligence. Tesla's share price is down 19% this year, but the stock trades around 150 times projected earnings for the next four quarters.
That is far above Alphabet's multiple of 18.5 times, while Ford Motor, General Motors, Toyota, Mercedes-Benz and Honda average multiples of about 7.6 times forward earnings, according to FactSet data.
"We have long argued that robotaxis are critical to the Tesla investment case," Tom Narayan of RBC Capital Markets wrote in a report last week. He says robotaxis alone account for about 60% of his estimated valuation of the company.
Tesla has to start somewhere. But the launch also serves as a reminder of how much road remains between it and Waymo.
The robotaxi service majority owned by Alphabet started operating in Atlanta this week. That makes five cities served by a fleet of over 1,500 autonomous vehicles in total.
Waymo plans to more than double that fleet by the end of next year, thanks to a new manufacturing facility in Arizona.
Investors are on board. Waymo raised $5.6 billion in a late-stage funding round last year. That deal valued Waymo at $45 billion, which put it among the 10 most-valuable, venture-backed companies that haven't yet gone public, according to data from PitchBook.
Some Wall Street analysts covering Alphabet have higher estimates now, given Waymo's strong lead in the robotaxi service market and a partnership with Uber that is expected to boost usage. Josh Beck of Raymond James put a "base case" valuation of Waymo around $150 billion in a report last month. He projects the company's gross bookings will average 129% growth annually for the next five years.
That sort of blistering growth rate certainly isn't guaranteed.
And the design of Tesla's service still leaves open the possibility that it could quickly catch up since much of the company's existing fleet could be theoretically converted into revenue-generating robotaxis through a software update. That design represents a major bet by Tesla Chief Executive Elon Musk, who has shunned the use of self-driving systems that include the more expensive Lidar technology that uses laser beams like radar to sense its surroundings.
Tesla's autonomous system is based on cameras and software, which is cheaper to deploy but adds potential for new problems, such as cars getting blinded by sunlight. And the company's large base of both friends and foes has given this launch unprecedented levels of scrutiny, with user-generated videos of the Tesla robotaxis flooding social platforms. Regulators are reportedly already making inquiries about instances where the cars appeared to violate local traffic laws.
A trillion dollars buys an awful lot of eyeballs on Tesla stock. But investors could be missing the more obvious bargain right in front of them in Alphabet.” [A]
More real world information for AI learning is better. It's difficult to pinpoint the exact number of Tesla vehicles on the road today, but estimates suggest there are around 4 million Teslas worldwide. Most of them could provide information for AI to learn self-driving. Tesla has more than 2.7 thousand times bigger real world information pool for AI learning than Waymo. Tesla is a well-known brand. Tesla has an ability to expand numbers of self-driving cars quickly.
This is priceless for scaling robotic driving. Nobody in the US can compete with this.
1. Vast Real-World Data Advantage:
Tesla's approach: Tesla leverages a massive fleet of consumer vehicles to collect real-world driving data, providing a constant stream of information to train its AI models. This is like having "millions of practice sessions happening simultaneously".
Scale of data: Tesla has the largest fleet of AI-training vehicles globally, with over 4 million cars collecting data. Tesla vehicles have gathered over 3 billion miles of driving data, which is a significantly larger dataset than Waymo's 22 million miles driven in fully autonomous mode.
Data diversity: Tesla's data is diverse, encompassing a wide range of environments from deserts to the Arctic, and different road conditions, including cities and rural areas. This helps with achieving generalized autonomy.
Comparison to Waymo: Waymo's data, while valuable, is focused on specific urban and suburban areas and is not as useful for generalized autonomy.
2. Focus on Vision-Only System:
Tesla's core technology: Tesla's self-driving system primarily relies on cameras and neural networks to interpret the environment, mimicking how humans learn to drive through vision.
Data for vision: Tesla's system processes visual data from cameras, recognizing pedestrians, road signs, traffic lights, and obstacles.
Contrast with Waymo: Waymo uses a multi-sensor approach, combining cameras with LiDAR and radar for redundancy and precision.
3. Ability to Rapidly Scale and Deploy:
Rapid iteration and updates: Tesla's approach allows for rapid iteration and deployment of software updates over-the-air, enabling continuous improvements to the self-driving AI.
Cost-effectiveness: Tesla's approach of using affordable hardware (cameras) and integrating the hardware for autonomy as standard equipment leads to a lower cost per vehicle compared to Waymo's expensive retrofitting process. This cost difference enables faster scaling of the fleet.
4. Well-Known Brand and Market Position:
Established brand: Tesla is a well-known brand globally and has a large presence in the electric vehicle market, contributing to the scale of its data collection efforts.
In summary, our observations highlight the strengths of Tesla's strategy, particularly its focus on utilizing a large fleet of vehicles for extensive real-world data collection, its vision-only approach to self-driving, and its ability to quickly deploy updates and expand its fleet. These factors contribute to Tesla's leading position in the development of self-driving technology.
However, it's also worth noting the challenges and alternative approaches mentioned in the search results:
Edge cases: Tesla's vision-only system faces challenges in difficult edge cases or adverse weather conditions like fog or heavy rain.
Waymo's progress: While Waymo's data is more focused, it has made significant progress in achieving fully autonomous operation in specific areas and has demonstrated improved safety metrics compared to human drivers.
Importance of simulation: Both Tesla and Waymo use simulation environments to train their AI models, especially for rare and complex scenarios that are difficult to reproduce in the real world.
Hybrid approaches: The future of autonomous driving may involve a combination of different approaches, potentially integrating the strengths of both Tesla's and Waymo's strategies.
A. Tesla's Robotaxi Shows Waymo Is Undervalued --- The Google service was last valued at $45 billion, while autonomous technology drives most of the EV maker's $1 trillion value. Gallagher, Dan. Wall Street Journal, Eastern edition; New York, N.Y.. 27 June 2025: B10.
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