Key Takeaways
- Andreessen Horowitz investor David George expects all 17 million new cars sold in the US each year to be autonomous within 10 years.
- Tesla is well placed to benefit, but Waymo, Uber and General Motors are each building their own claim on that market.
- Tesla’s cash from operations has covered its capital spending every year since 2021, and a former Tesla president says car sales are funding the longer road to robotaxis.
- Tesla trades at 12.9 times forward revenue, above its three-year average of 9.8 times, so the market already prices in a lot of the autonomy prize.
Here’s a forecast every Tesla (TSLA) shareholder should hear:
On last week’s episode of a16z’s State of Markets podcast, Andreessen Horowitz investor David George said “Self-driving works.” Then he went further:
“Plus there’s 17 million new cars sold per year in the US. And I think over the next 10 years, those will all be autonomous.”
All of them.
The call comes right after Tesla shares jumped more than 5% on Friday, when the company’s third-quarter deliveries came in 5.3% above analyst estimates. So it’s tempting to read George’s call as a straight win for Tesla. I think the prize is too big for one company.
Breaking down the math
Multiply Tesla’s 486,532 third-quarter deliveries by four and you get about 1.95 million cars a year, worldwide. Even if every one of them were sold in the US, that’s roughly one in nine of George’s 17 million.
So unless Tesla sells several times more cars than it does today, someone else will build most of America’s autonomous cars.
And that’s just the cars people buy. George noted that ride-hailing is about 1% of US miles traveled. With self-driving networks “14 times safer than human drivers,” he expects it to “expand by at least an order of magnitude in the coming years.”
Knock knock
Several companies are already going after those miles…
Waymo, owned by Alphabet (GOOG), leads in robotaxis. Its driverless service reached 14 US cities on Sept. 1, and it was already giving 500,000 paid rides a week back in March. While it’s not a material part of Google’s business…yet…they’re a clear beneficiary!
That helps Uber (UBER) too, given its extensive investments in self-driving. And of course, riders in Austin and Atlanta book Waymo rides through Uber’s app too. If ride-hailing grows anything like George expects, the app people already open to get a ride stands to gain a lot.
Then there’s General Motors (GM), coming at it from the car you own. GM says drivers have logged 1 billion hands-free miles in nearly 750,000 Super Cruise vehicles, and it plans to launch eyes-off driving on the Cadillac Escalade IQ in 2028. Expect every other automaker to follow suit sooner or later.
The cars pay for the robots
Of course, all this costs a fortune. As former Tesla president Jon McNeill, now CEO of DVx Ventures, told CNBC on Friday:
“They need the cash flow from the cars to fund what is looking like a longer road to robots and a longer road to cybercabs.”
The good news is that analysts expect the business doing the funding to grow again. They see revenue rising to $142 billion in 2028:
Nothing in Friday’s delivery beat makes me expect those estimates to come down, though energy storage missed consensus for a third straight quarter.
And so far, the cars are paying the bill for Tesla. Tesla’s cash from operations has covered its capital spending every year since 2021, including $14.8 billion against $8.53 billion of capex last year.
My view is that George’s forecast is a big deal, and Tesla is one of the companies best placed to benefit. But at its current high valuation, the market already prices Tesla as the winner. Meanwhile, Waymo, Uber and GM are each building a real claim on those 17 million cars and the miles they’ll drive. A prize this size will have more than one winner.
So what is Tesla stock actually worth?
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