Episode Details

Robotaxis are accelerating along the road to commercial viability. Auto and Shared Mobility Analysts Andrew Percoco and Tim Hsiao discuss what this rapid development means for global investors.

Read more insights from Morgan Stanley.

----- Transcript -----

Andrew Percoco: Welcome to Thoughts on the Market. I’m Andrew Percoco, Head of North America Auto and Shared Mobility Research. 

Tim Hsiao: And I'm Tim Hsiao, Greater China Auto and Shared Mobility Analyst.

Andrew Percoco: Today, why robotaxis may be approaching a commercial inflection point. It's Thursday, August 13th at 8am in New York.

Tim Hsiao: And 8 pm in Hong Kong.

Andrew Percoco: So Tim, for years, robotaxis were really confined to limited pilot rollouts across the globe. You've done a lot of work over the last few weeks. We put out a big collaborative report on the robotaxi market and how it could be a $1 trillion TAM by 2040.

What makes this moment different than some of the other robotaxi hype cycles that we've seen in the past? 

Tim Hsiao: We observe four things have been converging. Firstly, end-to-end AI is improving much faster. Secondly, hardware and the training costs are falling. And thirdly, more well-capitalized players can fund deployment. And last but not least, regulation is becoming clearer.

The leading operators are no longer just demonstrating the technology. They are running fully driverless services around the clock and generating commercial rides. So in our view, the questions has been shifting from can it work to who can expand operating areas, raise utilization and lower costs at a much faster pace.

So that's a very different setup versus the 2018 and 2021 hype cycles. 

Andrew, U.S. autonomous miles could rise from 116 million in [20]25 to 16 billion by 2032. But still make up only about 0.5 percent of all miles driven. How can robotaxis become a meaningful business while remaining such a small part of the market?

Andrew Percoco: I would say, you know, obviously the U.S. mobility and transportation market is a massive market. So even with the rapid growth that we expect in robotaxis, it's going to take a long time to make a material impact in the overall market share of mobility. 

But if you think about the profit pools in this business, 16 billion miles at $2 a mile can, you know, pretty quickly become a very significant TAM and market opportunity.

And I think, you know, fundamentally, if you think about a robotaxi business, I would argue you're better utilizing an asset... Or if you think about the, you know, car park, the amount of vehicles that are, you know, in the fleet today or in the U.S. today, they're sitting idle 90 percent of the time, right?

So you're talking about taking a smaller amount of volume and driving a higher utilization on that fleet and driving much improved economics. So yes, it's going to take time to displace the, you know, hundreds of millions of cars that you have on the road in the U.S. and displace the penetration of miles driven. 

But ultimately, you know, we think that the profit pool and the opportunity in robotaxis are much more attractive for the entire value chain, as it relates to robotaxis. And I'd say there's a few things that we're watching along the way to make sure that, to your point, you know, this is not another hype cycle. And that there's real commercial backbone to this business.

I'd say the first is seeing the rollouts continue to improve, and the density of the rollouts improve across the select cities that we've seen in the U.S. right now. Robotaxis are only available in a handful of cities in the U.S., so we want to see t