Self-Driving Can Disrupt The Private Automobile Market
Ultimately it’s not very likely that the superior safety record of autonomous vehicles is going to change for the worse. As people become increasingly comfortable about hitching a ride in driverless cars, self-driving technology will likely disrupt the private automobile market.
Alphabet will use Waymo to explore opportunities in personal vehicles, public transportation, logistics, and ride sharing. Alphabet is, in fact, one of the foremost companies in the autonomous driving field, and graduation of the project into a targeted revenue generating enterprise is a big positive for Google X and GOOGL stock. But perhaps nowhere is the opportunity for self-driving car greater than in the burgeoning shared mobility market, one that is championed by the likes of Uber and Lyft.
According to Morgan Stanley (1), cars will drive 19.6 billion miles globally in 2030, almost double the 10.2 billion miles they travelled in 2015. That growth rate is much faster than the estimated production of light vehicles over the same period which will lead to fast growth in the shared mobility industry. Shared cars accounted for just 4% of global miles travelled in 2015, but will account for nearly 30% by 2030.
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And, sharing a ride will gradually become cheaper than owning a car. Currently, it costs $0.76/mile for a self-owned car compared to $1.50/mile for a shared ride. But the tables will eventually turn and by 2030 it will cost $0.50/mile for a shared ride compared with $0.75/mile for a private vehicle. Vehicle sharing is seen as the biggest potential market for autonomous vehicles because they remove the human bottlenecks and improve the economics substantially. Morgan Stanley predicts that the shared mobility market will grow to a $2.6-trillion industry by 2030. In a wildly successful scenario, Alphabet might be able to sell as many self-driving cars in 7-8 years as BMW currently does. BMW sold 1.9 million vehicles in 2015. At an ASP of $75k, that would net the company $142.5B, almost triple its current annual revenue. So that’s a solid opportunity for Alphabet. Even 20-30% of that would still present a healthy incremental revenue stream for the company.
Investor Takeaway
In the recent past, the future of the autonomous vehicle remained unclear due to lack of a proper regulatory framework that would support mass sales of such vehicles. But with NHTSA starting to move quickly to introduce such regulations, the future of the industry looks bright.
Alphabet is amongst the first companies that are fully dedicated to the self-driving car industry. And now with Waymo the company will be in a better position to take advantage of the opportunities offered by the growing shared mobility market. It will probably take 3-4 years before Alphabet can start selling its autonomous vehicles in large enough volumes. But this is ultimately a long-term catalyst for GOOGL stock.
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The article Alphabet Inc’s (GOOGL) Next Growth Cycle Is Closer Than You Think originally appeared on amigobulls.com. Watch our analysis video on GOOGL (2).
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Additional Links
(1) http://www.morganstanley.com/ideas/car-of-future-is-autonomous-electric-shared-mobility
