There's a growing realization on Wall Street that self-driving cars are still many years away. That pessimism is weighing far more heavily on traditional automakers than technology companies.
The big picture: Investors are betting the real value of AV companies will come from the estimated 4 terabytes of data each car will generate per day. And based on the way they’re valuing the major AV players, Wall Street seems to think tech companies have a better shot than Detroit at capitalizing on that data.
The bet on data helps to explain why analysts at Morgan Stanley have very different views on the two leading AV companies, GM's Cruise Automation and Alphabet's Waymo.
- Auto analyst Adam Jonas recently reduced the value of Cruise Automation to $9 billion from $11.5 billion, citing delayed expectations for fully self-driving cars.
- Meanwhile, tech analyst Brian Nowak figures Waymo is worth $37 billion, and perhaps as much as $175 billion, citing future opportunities from robotaxis, logistics and licensing revenues.
- Those same opportunities are available to Cruise, too, but GM investors currently are focused more on the roadblocks ahead.
- Jonas says the massive gap between Cruise and Waymo is realistic because of the advantage Waymo has from Google's superior data analytics capability.
What's happening: The mood has changed about AVs. Bold predictions by Tesla and others that cars would be able to drive themselves by now have evaporated in the face of technology challenges and market realities.
The business model for AVs assumes that by removing the driver, the cost per mile falls dramatically, from today's $2.50 or $3 per mile to less than $1, unlocking a much larger market opportunity.
- "If you are going to be more pessimistic on the timing, then it means not removing the safety driver and that means the economics of the whole thing don’t work," Jonas says.
- "Instead of a $30,000 car with no human, you've got a $300,000 car with one or two humans."
That math looks even more difficult when you factor in the pressures facing GM's legacy automotive business under CEO Mary Barra, who is trying to lead a rapid transformation. It's a race, Jonas says, between management's execution and a cyclical downturn ahead.
The bottom line: "The value is in the data, and what you can do with it," Jonas adds.