Key Points
There’s a lot of hype surrounding robotaxis.
Cathie Wood, CEO of Ark Invest, believes robotaxis will one day be a $10 trillion global industry. A survey of experts by McKinsey & Co., meanwhile, estimates that “the global rollout of robotaxis is now expected to become reality at a large scale in 2030.” The consultancy stresses that “robotaxis will be the first commercial application for L4 in mobility — not privately owned cars.”
Much of Tesla‘s (NASDAQ: TSLA) $1.2 trillion valuation is now tied up in robotaxi growth opportunities. Shares trade at 13 times sales.
Uber Technologies (NYSE: UBER), meanwhile, trades below 3 times sales, with a market cap of around $140 billion. The market fears that the robotaxi revolution will disrupt Uber’s core business. In reality, there’s a good chance Uber will become the go-to platform for robotaxis worldwide.
Here’s why Uber will win the robotaxi revolution
Pershing Square founder Bill Ackman recently summed up how powerful Uber has become in the ridesharing business. “Uber has achieved the rare feat of becoming a verb,” he told Fortune in August.
This is key to Uber’s ability to compete in a robotaxi-dominated world. The company already controls the demand side of the equation. Its Uber One membership has more than 50 million subscribers.
Tesla may be able to produce robotaxis more cheaply than the competition. But it still needs to convince consumers to download its app and then commit themselves to a Tesla-only service.
Uber, meanwhile, will be manufacturer-agnostic. Other robotaxi fleets, which will rely on high use rates to generate profits, will want to go where the demand is. That will mean participating in Uber’s platform.
With free cash flow margins of nearly 20%, Uber stock is already cheap. And its future is much brighter than the bears would have you believe.
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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.