Waymo, Worth Way Less Than First Thought, Is Pondering Its Future
In 2018, Morgan Stanley valued Waymo at $175 billion. That is a lot of cashola for a company with virtually no income and a lot of outgo. At the time, Morgan Stanley justified that valuation by claiming Waymo was the world leader in self-driving technology. (Elon Musk and the many fans of Tesla would disagree with that assessment.) A year later, the bank said $105 billion was the right number.
But in recent weeks, as several outside investors were getting ready to pony up $2.5 billion in additional funds for the company, the number bandied about among the participants in the funding round was $30 billion, according to the Financial Times. That’s a whopping $145 billion less than Morgan Stanley’s original number, which might be food for thought the next time you are relying on advice from Morgan Stanley to make a significant investment decision.
So what’s ahead for the former Google startup? According to Automotive News, some industry observers think the costs of developing autonomous driving systems may have gotten too much even for Alphabet, parent company of Waymo, which has sunk billions into self-driving technology over the past 13 years.
“Developing autonomous technology is capital-intensive, and raising outside funding helps companies cut costs and limit downside risk,” Asad Hussain, mobility analyst at financial data company PitchBook, tells Automotive News. “Raising outside capital should free up Waymo’s team to redouble its focus on developing technology and not on rweducing expenses.”
Waymo CEO John Krafik says in a blog post dated March 2, “We’ve always approached our mission as a team sport, collaborating with our OEM and supplier partners, our operations partners, and the communities we serve to build and deploy the world’s most experienced driver. Today, we’re expanding that team, adding financial investors and important strategic partners who bring decades of experience investing in and supporting successful technology companies building transformative products. With this injection of capital and business acumen, alongside Alphabet, we’ll deepen our investment in our people, our technology, and our operations, all in support of the deployment of the Waymo Driver around the world.”
Recently, Waymo has turned its focus on freight and package delivery services under the heading of Waymo Via. One of the participants in the new funding round is Auto Nation, which added $50 million to the pot. It is the largest auto retailer in the US and will be using Waymo modified Chrysler Pacificas to perform autonomous parts deliveries. Waymo is also partnering with UPS for autonomous deliveries between distribution centers in the Phoenix, Arizona area.
According to the Robb Report, Krafcik told the Financial Times the company may also be interested in becoming a technology supplier to the auto industry. The costs of developing self-driving systems are enormous and may be more than many small to midsize car companies can afford. Waymo could be the savior those companies need if autonomy becomes a “must have” feature for car buyers in the future.
Waymo’s fifth generation self-driving technology will be appearing soon on a fleet of Jaguar I-Pace electric SUVs, with the first of those cars already on their way to San Francisco for final testing. Regardless of what its market valuation may be, it intends to be a major player in the market for self-driving vehicles whether they are passenger cars, robotaxis, automated delivery vehicles, or self-driving tractor trailers.
The business case for Waymo has always been shrouded in a certain degree of mystery. Perhaps now it is ready to stop spending money and actually begin bringing some money in the door. Then and only then will anybody be able to put an accurate valuation on the company.
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