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Is Cathie Wood's Robotaxi Thesis Realistic?

Will "robotaxis" -- self-driving ridesharing vehicles -- be the key to exponential profit growth for companies like Tesla (NASDAQ: TSLA), as ARK's Cathie Wood famously argues? In this Motley Fool Live broadcast, recorded on May 27, Industry Focus host Nick Sciple and Motley Fool senior auto specialist John Rosevear take a look at Tesla's -- and others' -- self-driving efforts and assess when, and whether, self-driving taxis will be both ubiquitous and highly profitable.

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Nick Sciple: We got another question from [viewer] Amir, on the future and where things are going. He said, "Part of ARK's investment thesis in Tesla is high-margin software-as-a-service robotaxi revenue. What are your thoughts on that? Do you think any of other automakers that we're talking about will also offer that in the future to grow the revenue?" What do you think about the potential for Robotaxi revenue for these companies?" Then I think the follow-on question is, what do you think about the timeline for Robotaxi revenues for these companies?

John Rosevear: As I understand it, part of ARK's very optimistic case for Tesla is that they're going to make a lot of money on software. I would note that's what we spent the first half hour talking about what Ford is doing. Tesla is going to do it, Ford is doing is, [General Motors] is doing it, Volkswagen is doing it, Toyota will do it. It is a place to capture additional revenue. I would be hesitant to say any one automaker is going to capture most of that revenue. That's not how it works on autos. But for robotaxis, a good question, I don't think too many people are still holding onto the idea that your Tesla can go drive itself off when you're not using it and garner revenue for you and come back and be all ready. I think we're quite a few years away from that. I think we're a couple of years away from limited deployments and carefully mapped parts of cities. Cruise is talking about doing something in Dubai in a couple of years. Ford is talking about rolling out some limited self-driving service of some kind next year that maybe a passenger service or maybe a delivery service, a flight service. I think things like self-driving semis for highway use, tractor trailers are not all that far away. Tesla may play in that market. We'll see how the [Tesla] Semi actually does in the market.

Again, that's a case where the income that's have a big advantage because of just fitting into fleets. But everybody I talk to who is much smarter than me about self-driving technology says it's a long way off. It is still a long way off. I think even Waymo has conceded that at this point. It's not a two- or three-years thing. We'll see where we are by 2028, I think. Maybe there will be a breakthrough and things will happen faster. Five years ago, we all thought by 2025, there would be no more car business. Not we all, but there were people saying that because we'd all be driving robotaxis everywhere. Clearly, that's not where we're going to be by 2025. I'm not sure it's where we're going to be ever, but there is a place for robotaxis if we can really make some on any realistic timeframe. I think the last year or two has been a case of just pushing those timeframes out further and further. If you are betting that Tesla or Cruise or Waymo or anybody else is going to nail this in the next 12-18 months, I would take the other side of that bet. If you are betting that all three of those companies and many more could profit from these in seven to 10 years, I like that bet better.

Sciple: Still very uncertain on whether these services can really get rolled out. There was a story last week where Waymo has been first-to-market in developing autonomous vehicles, has a service running in Chandler, Arizona. There was a video you can go watch on YouTube of the car got stuck, then the car ran away from the service crew, was blocking two lanes of traffic, this and the other. This is what we think of as the market leader and that has been developing this for a decade. I think when you look at the actual and if you can look at some videos of the Tesla full self-driving package for folks that it's been unlocked for, when you see the actual performance of these things on the ground, I don't know how you can look on that and say all of a sudden, this revenue stream is going to turn on anytime in the near term. I think Cathie Wood is very smart, I thing she has some very strong models, had some good success in the past. If it was me, I would not be modeling any of that in these companies' revenue. I think it's far too uncertain.

Rosevear: I wouldn't either. Not yet. I mean, you can look at what this might be by 2030, but don't build that into your near-term price case for the stock. Hold that out as if these hurdles are left in a timely way before some of the competitors could see this. But don't bet your retirement on it.

Sciple: We'll see. We've been talking about self-driving cars going on 10 years now. It seems like so. It's to the point where we've been told the story for a while, I'm ready to see some results. For me, I'm not really going to be baking in real valuations on many of these companies until I see actual services up and running. We've only really got that from Waymo, and Waymo hasn't really expanded very much in the past few years, so still a lot to be proven out there. John, thank you so much for joining me for this last hour.

John Rosevear owns shares of Ford and General Motors. Nick Sciple has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Tesla. The Motley Fool has a disclosure policy.


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