The State of California's Department of Motor Vehicles released some astounding figures on autonomous vehicle (AV) testing Wednesday. Companies testing self-driving cars on California's roads are required to file periodic reports with the state noting aggregate miles traveled in autonomous mode and the number of instances in which a human driver was required to intervene. The range of disclosure is amazing, as UBER's filing is a succinct 1,242 pages while Tesla's is two and contains the nugget that Tesla cars were driven a grand total of zero miles in fully autonomous mode on California roads in the year ending November 30, 2018.
Wait, don't Teslas have Autopilot? Aren't they self driving cars? Well, yes and no. The race for AVs can be divided into two acronyms, ADAS and MaaS. ADAS stands for advanced driver assistance systems, a consumer-focused effort that is usually rated based on degrees of autonomy on the Society of Automotive Engineers scale. Tesla's (TSLA) Autopilot is classified as Level 2 by the SAE on the five-level scale, on which Level 5 is total vehicle autonomy with no driver interaction.
ADAS has advanced slowly in the past 20 years from basic systems like adaptive cruise control to Tesla's Autopilot and Audi's (VLKAY) Traffic Jam Assist, but MaaS, which stands for Mobility-as-a Service, is a completely different ballgame. If you are designing a vehicle -- not a car -- to carry passengers without the aid of a driver, you wouldn't need a steering column and you might not need forward seating, as startups like Zoox are aligning their vehicles so that the interior passengers face each other, not the road.
MaaS is where the big money is being spent, and the articles you have read about "self-driving cars" being developed by Alphabet's (GOOGL) Waymo, UBER and GM's (GM) Cruise division, among others, are describing MaaS systems. These systems could revolutionize human transport, but have been met with some resistance owing to accidents like UBER's fatal crash in Arizona and the strange appearance of the test vehicles with their weird contraptions on top -- that's the LIDAR, a light based ranging system, as well as some other tech. I have read several reports, especially involving Alphabet's Waymo testing in Arizona, of regular drivers harassing the self-driving vehicles, which by statute still must carry humans equipped to take over driving capabilities.
Yes, change is hard, and massive corporations building robotic vehicles does rub some folks the wrong way. So, if you are a true Luddite and want to hang out with the Guru, please contact me via Real Money and I will travel to Chandler, Arizona -- site of Waymo's real-world AV testing -- and meet up with you. Anyone who knows me knows this is not an idle promise. We will find a friendly local homeowner whose house sits on a route used by Waymo test vehicles, sit in the driveway, drink beers, and safely mock those ridiculous flying saucer-topped machines. We will rage against the machines while listening -- at appropriate volume -- to the classic tunes of Rage Against The Machine.
Tongue out of cheek, MaaS is an enormous potential market for global companies. The way humans travel will change not based on the diktats of moronic politicians, but based on the fact that humans are sentient beings who understand the need --or lack thereof -- to commit capital to machines that are used on average less than 5% of the time.
I am out of space for today, but I will draw a finer point on ADAS vs. MaaS -- and how to play those trends as an investor -- in my column tomorrow. The list of companies involved in the race for AVs is quite impressive -- Alphabet, Amazon (AMZN) , Apple (AAPL) , GM, Ford (F) , Tesla, VW, Baidu (BIDU) and Tencent (TCEHY) , among many others. As market participants learn how to properly value the upside from AVs and, crucially, to differentiate between the winners and the losers in the race to AVs, I believe the valuations attributed to those companies will be affected.