The ‘expedition’ of self-driving cars… and an even bigger AV bet

In 1994, 27 years old Microsoft Corp. (MSFT) product manager Rich Barton pitched a game-changing idea to Bill Gates and other executives…

What if you could take your travel booking…and move it online?

The result was Expedia Group Inc. (EXP)a project that would debut in 1996 and become a standalone company in 1999. Acting as a one-stop shop for travelers, Expedia’s website would become an even more popular online destination than the airlines and hotels it served.

Today, four of the five most visited travel sites in the United States are aggregators like Expedia, and their combined market value exceeds $235 billion – more than the value of the 10 most valuable hotel and airline companies combined. In fact, every major U.S. airline continues to trade below January 2020 levels, while Expedia has held on.

The reason is that people love convenience.

Why check half a dozen airline sites for a Christmas flight when a single visit to Expedia can instantly give you the cheapest options? And while airlines have fought back with rewards programs and exclusive web-only deals, Expedia and other online aggregators still remain far more valuable for their ability to pick the best options across all carriers.

The same truth will soon emerge in the world of autonomous vehicles…

The self-driving revolution

On October 10, Tesla Inc. (TSLA) is expected to announce plans to become its own “provider” of robotaxi services. If this is the case, they will join Alphabet Inc. (GOOGL)-owned by Waymo and General Motors Co. (GM)-owned by Cruise in providing self-driving services.

This will change the game for electric vehicle companies.

Automakers have long known that cars are parked about 95 percent of the time. Most vehicles are required on demand and we simply leave them in driveways and parking lots because they cannot move on their own.

But what if they could? A single vehicle could theoretically drop one person off on a morning commute…then return home to take another family member grocery shopping…and another to daycare…and so on away. Suddenly, there would be no need to have 1.8 cars per household when you can share a single vehicle with multiple family members or neighbors.

Consulting firm Oliver Wyman estimates that driverless vehicles could reduce net demand for cars by as much as 15% by 2035, even as the number of people using cars increases. It’s no wonder why companies like GM are willing to rush the development of their self-driving vehicles… even after causing high-profile, disastrous accidents. Losing the self-driving revolution would be disastrous for automakers given the high fixed costs of production.

The stakes for automakers will get even higher as Tesla steps in. They know the electric vehicle firm has a history of knocking out slower-moving competition; one in two electric vehicles in the US are still built by Tesla. And if Tesla owners become able to rent out their cars as taxis, then the Detroit automakers had better offer similar technology if they expect to survive. (It’s also one reason why Eric doesn’t recommend any of these automakers like General Motors (GM) yet.)

Meanwhile, the ridesharing company Uber Technologies Inc. (UBER) sold its self-driving unit in 2020 as the company realized it was largely immune to being replaced by self-driving vehicles. Instead, Uber and other ride-sharing firms will benefit from self-driving technologies because they can quickly become a market for these services, like Expedia. Why buy a Tesla Cybercab – or sign up for some kind of co-op – when an aggregator like Uber can send you the nearest car (of any model) at the lowest price?

Most American travelers are more interested in the deal they’re getting than the airline they’re flying or the name of the hotel they’re staying at. And if companies like Uber play their cards right, them would be the ones who benefit most on the road to full autonomous driving, rather than the automakers who ultimately perfect the technology.

In fact, when Uber tried to replace controversial founder Travis Kalanick in 2017, they chose Dara Khosrowshahi, who at the time ran for… you guessed it… Expedia.

AV bet even higher

However, Uber is not guaranteed to succeed in self-driving. While it’s been dealt a great starting hand, the ride-hailing firm still has to navigate an incredibly complex set of offerings with some powerful providers. If Tesla refuses to join a shared network, for example, Uber could find it difficult to attract other providers.

Uber will also need to manage the transition from human-based drivers to autonomous ones. They will go from dictating terms against thousands of drivers to negotiating against top lawyers in Silicon Valley and Detroit. The current profitability of the transport-hailing company is not guaranteed in the future.

That’s why I’m excited to share with you that InvestorPlace Senior Analyst Luke Lango he could have found company with a par better chance of success. In a presentation on Monday, October 7, 10:00 a.m. Eastern TimeLuke will introduce this little known company that could grow up to 20X (sign up here).

This firm is currently supplying Elon Musk with technology that could play a key role in his robotaxis. It has already attracted big investments from billionaire David Shaw and venture capitalist Peter Thiel. And best of all, its low starting price leaves the door open for huge gains that were once only available to private investors.

It’s an event you won’t want to miss. You can click here to book your place.

Sincerely,

Thomas Yeung

market analyst, InvestorPlace