Waymo: Cash Breakeven & Software Portability

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Can you tell me how you ended up at Waymo, what you were brought in to oversee, and what your primary role there was?

My current thesis on ride-hailing is that I don't think AV1.0, what Waymo is pursuing, will ever reach break-even or become cash flow positive by the end of the decade without a breakthrough. For ride-hailing to take off as everyone wants, you need a technological breakthrough that makes it more portable and lower cost. The technology isn't viable enough right now for new fleet operators to enter the market and run autonomous fleets like Cruise and Waymo. They're taking all the risk, and it's not profitable. To attract fleet operators, the technology and commercialization must be really attractive because there's a lot of risk involved. This feels far away, but if Wayve or Tesla solve autonomy without LiDAR, then we're on a different path. I think there's a path to autonomous ride-hailing becoming the dominant form of transportation in cities, getting closer to that trillion-dollar market opportunity.

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Thank you for that information. It's helpful. I have several questions, but let's start with Waymo. During your time there, what was your impression of why the economics were so challenging? Was it specifically due to the high lidar costs that made profitability at scale difficult? What were the cost bottlenecks that contributed to a somewhat unsustainable economic model?

It's interesting. Sure, the equipment was expensive. At the time, these are rough numbers, you might have a vehicle costing around $75,000 and a tech stack that initially could have been about $150,000. Over time, these costs decrease, so you might end up with a $75,000 vehicle and a $25,000 tech stack. That's the direction we're heading, with improvements in lidar and better components. There's definitely a path to reducing the fixed costs.

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Thank you for that information. It's helpful. I have several questions, but let's start with Waymo. During your time there, what was your impression of why the economics were so challenging? Was it specifically due to the high lidar costs that made profitability at scale difficult? What were the cost bottlenecks that contributed to a somewhat unsustainable economic model?

However, in my opinion, that's not the main issue. The real problem lies in the portability of the software. The biggest commercialization challenge, which still exists today, isn't related to the unit cost of the car. It's more about the software's adaptability. For example, they launched in Phoenix with probably the third generation of software. Now, they're ready to launch in San Francisco with the fourth generation, or maybe the I-Pace is the fifth generation of software. They plan to use this to launch and learn in San Francisco.

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