Prof G Markets
00:23:44 · Ed Elson, Dan Chiolan
[00:23:44] S5: On an international level, who is winning the AV race? It sounds like you believe that that the winner currently is Waymo, but Tesla seems to be beginning to catch up. On an international level, US, China, who's winning autonomous? [00:24:02] S4: Yeah. So I think internationally, it's definitely between The US and China. There are, you know, countless companies in China trying to do autonomous driving. I think where China is really winning is in manufacturing because they have the ability to manufacture electric vehicles and autonomous vehicles at a cost that's much lower than than any American company. But in terms of commercialization, America is definitely in the lead because there's no company in China that's doing as many paid rides as Waymo is. So so we're sort of very clearly in first place in that aspect. The thing that I think is important to know is most likely we will never see each other's technology. Like, America's never going to allow Chinese self driving companies here in America, and China won't allow American self driving companies in China. The place where the race is really gonna play out is in The Middle East and Europe, where those those countries can kind of, you know, choose which country to to get their autonomous driving technology from. And I think what's interesting so far is in The Middle East and in Europe, they've by and large gone with Chinese companies, whereas, you know, American companies like Waymo or Tesla have not been able to expand internationally. Do you think
00:24:02 · Dan Chiolan, Ed Elson
[00:24:02] S4: Yeah. So I think internationally, it's definitely between The US and China. There are, you know, countless companies in China trying to do autonomous driving. I think where China is really winning is in manufacturing because they have the ability to manufacture electric vehicles and autonomous vehicles at a cost that's much lower than than any American company. But in terms of commercialization, America is definitely in the lead because there's no company in China that's doing as many paid rides as Waymo is. So so we're sort of very clearly in first place in that aspect. The thing that I think is important to know is most likely we will never see each other's technology. Like, America's never going to allow Chinese self driving companies here in America, and China won't allow American self driving companies in China. The place where the race is really gonna play out is in The Middle East and Europe, where those those countries can kind of, you know, choose which country to to get their autonomous driving technology from. And I think what's interesting so far is in The Middle East and in Europe, they've by and large gone with Chinese companies, whereas, you know, American companies like Waymo or Tesla have not been able to expand internationally. Do you think [00:25:17] S5: that is a function of Chinese technology being better or maybe it's a geopolitical strategy? May... I mean, I can't tell if that says something about China's influence on Europe and The Middle East geopolitically. What is your read?
00:25:17 · Ed Elson, Dan Chiolan
[00:25:17] S5: that is a function of Chinese technology being better or maybe it's a geopolitical strategy? May... I mean, I can't tell if that says something about China's influence on Europe and The Middle East geopolitically. What is your read? [00:25:35] S4: I think they already have entered those countries with their electric vehicles and their vehicles in general, which has allowed them to get sort of a a foothold in the market there. But I also just think it's it's it speaks to American company strategy of focusing on the domestic battle first. Right? Waymo does have plans to expand internationally, but they're really focused on rolling out here in America first. [00:25:59] S5: One of the other obstacles for autonomous has been regulation. What does the regulatory picture in America look like right now?
00:26:08 · Dan Chiolan
[00:26:08] S4: So it's it's currently very fragmented, and that's because it's all happening at the state level. There's really been no federal framework or action sort of passed by the federal government to guide these companies on how they should be regulated. And that is a very messy process because it means each of these companies needs to go through the painstaking process of lobbying each state individually to be able to test and then to, you know, be able to operate noncommercially and then commercially and then expand from there. And so what that has produced is a is a pretty large lobbying battle between, you know, drivers unions and unions at the state level and then these robotaxi companies. We've also seen Waymo dramatically ramp up their federal lobbying spend in the past couple years. So I think the political battle is going to continue to play out in America. I do think it's also interesting to note that autonomous vehicles are not sort of insulated from the political backlash that the rest of, you know, AI and and autonomous robotics in general have received here in America. We talk about it on the show often. It's the same force that has sort of prevented data center construction in many local communities. So public opinion on AI is souring, and I think we're seeing that reflected in what people think about autonomous vehicles. There's a really interesting poll here. Galloway polled Americans in 2018 about whether or not they think that some amount of autonomous vehicles improve road safety overall. And at that time, about 52% of Americans agreed. They ran the same poll last year, and the share of Americans who agreed actually went down by 12%. And that's despite the fact that, you know, in that time, autonomous vehicles went from basically not existing to getting exponentially safer every single year.
00:27:53 · Ed Elson, Dan Chiolan
[00:27:53] S5: Wow. [00:27:54] S4: So it's really... You know, it's impossible to divorce people's sentiment about AI and this technology in general from the technology itself. [00:28:03] S5: Despite the fact that is statistically safer, is my understanding. As we wrap up, if you wanted to make bets on autonomous, say someone's listening to this, they're like, oh, I wanna bet on this thing or invest in this. I shouldn't say bet. How would you do it? What are the trades or the investments that you would look at?
00:28:24 · Dan Chiolan
[00:28:24] S4: It's pretty early days for autonomous vehicles. But as the technology progresses, I think there's gonna be a couple places you can look for winners. The places where I'm gonna be looking is first in the sort of picks and shovels play, which are companies that are actually making the components that go into these vehicles. I think the first opportunity here are gonna be companies that make LiDAR sensors. And those are... Those expensive sensors that are in Waymo's and and and Zoox's and pretty much every autonomous vehicle. And I think the reason why there's an opportunity there is because currently, 95% of passenger car LiDAR sensors, which are in these autonomous vehicles, are made in China. And, obviously, that's a huge national security risk. Those Chinese made sensors are already banned for military use. And there's actually bills in congress that would ban them for civilian use as well. So if that happens, there would be a huge opportunity for American companies to come in and manufacture those sensors. So there's gonna be some winners there. The second is gonna be in the maintenance and upkeep of autonomous vehicles. Right? Because unlike Uber and Lyft where drivers themselves are maintaining their vehicles, these companies are going to have to maintain thousands of vehicles at scale across the country. You know, they need to to charge the vehicles. They need to park them. They need to clean them. Currently, there are a few startups that are looking to do this as a service for those companies, but there is an industry here in America that I think is gonna see a huge windfall from this need, which is the car rental industry. You know, if you think about car rental companies, they already have these facilities around the country sort of ready to go. And just last week, actually, Hertz announced that they're standing up a new leg of their business to do exactly that, to service autonomous vehicles. So I think we're gonna see see more car rental companies sort of pivot in that direction as well. And then I think the last winner is gonna be the trucking industry. Because if you look at trucking, about 44% of trucking's marginal costs come from driver compensation and benefits. So if you can automate those costs, you know, it's obviously very lucrative. There's currently a company called Aurora that's testing self driving on American roads.