Only meteorologists are allowed to be wrong more often than stock analysts and keep their jobs. Adam Jonas, the famous — some would say infamous — Morgan Stanley analyst who covers the automotive industry in general and Tesla in particular, said in 2015 that Tesla’s autonomous ridesharing network alone was worth $244 a share. Today, he has changed his tune. In his judgment, the Tesla Network will be worth $95 a share, or a total of $17.7 billion, by 2040. By contrast, Waymo, the autonomous ridesharing company owned by Alphabet (aka Google), will reportedly be worth $175 billion — almost ten times as much.
The interesting thing is that no autonomous ridesharing service is currently in existence. So how can anyone — even someone with the perspicacity of Adam Jonas — assign a value to a business that doesn’t exist? Easy. You simply make a pronouncement, cite a few statistics, and voila! Turn off the lights, lock the door, it’s Miller time.
Few Details From Tesla
Here are some factors Jonas says back up his valuation. He notes that Tesla has shared “extremely few details about how shared autonomy can be positioned as a separate business model.” By contrast, Cruise and Waymo have been “increasingly conspicuous with their efforts to grow the business with specific targets for commercialization and deployment.”
Three years ago, Elon Musk floated an idea for a Tesla Network that would allow individual Tesla owners to help pay for their cars by allowing them to participate in a ridesharing network operated by Tesla. Musk said Tesla owners would only be able to use the self-driving feature in the Tesla Network, not competing networks.
Few details about this Tesla Network have emerged since then. Although, in May 2017, an unusual looking people mover made a cameo appearance in a Boring Company video. Was it the 10–12 passenger vehicle Musk has hinted could be built on the Model X chassis? During this year’s Q1 earnings call, Musk said that Tesla vehicles will be capable of full autonomy by the end of 2018 from a “technical standpoint.” But he added regulatory uncertainty makes it difficult to predict when full autonomy might actually begin.
Tesla Does Autonomy Differently
The Tesla approach to autonomy is fundamentally different from what other companies are doing. Tesla builds its system so its cars can figure out how to navigate anywhere on any road without a pre-loaded library of digital maps. Waymo and Cruise rely on such maps. If their cars wander into unfamiliar territory, they are basically “blind” and unable to find their way back home.
“In our opinion,” Jonas writes, “Tesla may one day need to make a strategic decision over whether to pursue a shared autonomy strategy on a ‘go-it-alone’ basis or whether to find ways to ‘attach’ their vehicle data and fleet management ecosystem to one or more external platforms that maybe in a far better position to pursue data monetization, improved customer engagement/experience and lower cost to the consumer.” He notes that Tesla’s cost of capital is also higher than Waymo’s.
Tesla’s Early Lead Will Fade After 2030, Jonas Says
Morgan Stanley does predict that Tesla will take the lead in the field, at least initially. Jonas says Tesla’s autonomous vehicle ridesharing network will have more vehicles, more miles traveled, and greater revenue than Waymo by 2030. “In short, we assume Tesla gets off to a faster start than Waymo in terms of shared miles accumulation, but that Waymo catches up and surpasses Tesla just a few years later and with likely a more sustainable and protected business model,” Jonas writes.
From 2030 to 2040, Jonas expects Waymo will continue to expand aggressively, reaching $724 billion of revenue and $92 billion of operating profit by that date. Come 2040, he values Waymo at $175 billion, the Tesla Network at $17.7 billion, and Cruise at $11.5 billion. Don’t you wish your high school guidance counselor had told you it was possible to make a comfortable living by creating predictions based on nothing but supposition? Nice work if you can get it.