The Waymo and Toyota strategic partnership aimed at developing a new autonomous vehicle platform is expected to change the whole picture of robotaxis and self-driving cars.
The collaboration, which seeks to integrate Waymo's self-driving technology into Toyota's vehicles, eventually expanding beyond ride-hailing services to include personally owned autonomous vehicles, is moving robotaxi forecasts, specifically, into bullish new territory.
The global robotaxi market was valued at just $400 million in 2023 and is expected to reach nearly $46 billion by 2030, according to marketsandmarkets.com.
Why are analysts so bullish? The partnership blends Toyota’s global manufacturing prowess and track record for execution with Waymo’s software expertise, positioning both companies as potential leaders in a market projected by McKinsey & Co. to potentially be worth a staggering $2.4 trillion by 2040. Waymo is owned by Google, but the unit is widely expected to be spun off in the next few years.
The collaboration, which also includes Toyota subsidiary Woven in the area of software and mobility innovation and development, marks a significant shift for Waymo, which has primarily focused on its Waymo One ride-hailing service. By linking with Toyota and the company’s global footprint and track record for lean manufacturing, Waymo aims to tap the self-driving passenger market through the world’s largest automaker by volume.
"Toyota is committed to realizing a society with zero traffic accidents and becoming a mobility company that delivers mobility for all,” says Hiroki Nakajima, executive vice president of Toyota Motor Corp. We share a strong sense of purpose and a common vision with Waymo in advancing safety through automated driving technology."
Significance Relative to Tesla's Plans
Tesla Motors also with big designs on the robotaxi market, is set to introduce the next phase of its development next month. The No.1 BEV maker, however, is bogged down for now by dramatic sales declines in Europe and the U.S., and its self-driving tech is raising questions among industry analysts. Tesla has long been a proponent of personally owned autonomous vehicles, with its Full Self-Driving (FSD) system designed for consumer use. However, Tesla's approach, applied to robotaxis, relies solely on camera-based systems and neural networks, without the use of lidar or radar. Waymo is seen as superior in the context of safety, and Toyota’s reputation for safety and reliability will be a big boost to scaling Waymo’s tech.
Waymo employs a combination of lidar, radar and cameras, along with detailed mapping, to navigate its vehicles. This sensor-rich approach has enabled Waymo to operate fully autonomous ride-hailing services in several U.S. cities, including San Francisco, Los Angeles, Phoenix and Austin, completing over 250,000 paid rides weekly.
"This marks Waymo's first partnership and licensing of its leading autonomous technology into the personally owned vehicles (POVs),” segment, says Brian Nowak, analyst at Morgan Stanley. He emphasizes that while Waymo's ride-hailing service, Waymo One, has been a focal point, this partnership underscores the opportunity for Waymo to serve as the "autonomous mode software" behind a broader fleet of cars in both the near and long term, both as commercial/livery and as personal passenger vehicles.
Sundar Pichai, CEO of Waymo parent Alphabet, said recently that the company is already considering offering Waymos as personal vehicles through the Toyota partnership. There is “future optionality for personal ownership,” says Pichai.
Ross Gerber, CEO of Gerber Kawasaki Wealth & Investment Management, says Tesla’s lack of comparable progress in self-driving vehicles is a worry to investors. "I'm disturbed by the lack of progress and the overpromising on robotaxis. The company needs to focus on delivering real results." Gerber also cites the company’s history of delayed projects and his negative personal experience with Tesla’s self-driving software as a concern.
Waymo’s Journey
Waymo started as a small autonomous-vehicle project at Google (now Alphabet) in 2009. In 2017, it first started testing a fleet of Chrysler Pacifica minivans in Phoenix before launching a commercial service for the public the following year.
Waymo expanded to San Francisco in 2021 using Jaguar I-Pace electric CUVs retrofitted with radars, lidar and cameras. These cars operate in Los Angeles and Austin, with Atlanta and Washington, DC, on the horizon. The fleet is growing fast, already operating 700 robotaxis in the U.S., of which 300 are in San Francisco.
One of the drags on robotaxis is regulatory hesitancy. Most lawmakers in most cities aren’t ready to commit to permitting them. Waymo is trying to combat that reluctance. A new study from the company asserts that its driverless ride-hailing service is safer than human drivers in many situations. The study is authored by Waymo engineers, thus discounting its potential impact on regulators and safety advocates. But it will be published in the journal Traffic Injury Prevention, which means it's been peer-reviewed by the scientific community.
Increasing hostility by the public in the U.S., as well as the European Union, has dramatically impacted sales of Tesla EVs on both continents and could extend to the company’s eventual robotaxi business because of well-organized boycotts of Tesla’s consumer- facing businesses as a response to CEO Elon Musk’s spending to support far-right political candidates in the U.S. and Europe.
Analysts at Jefferies, led by Philippe Houchois, have noted that governance issues, Musk's leadership style and his political activities will be a distraction from Tesla’s long-term goals, “including the development and deployment of robotaxis.”
