PitchBook News - Robotaxis' unit economics problem

Heavier traffic. Double-parked vehicles. Challenging intersections. Unpredictable cyclist and pedestrian behavior.

Relative to lower-density areas, operating autonomous vehicles in dense cities presents many complications. At the same time, we show in our new research that the bulk of the revenue and profit opportunity for robotaxis is most likely to be found in dense cities—where trips are frequent and prices are high.

In less-dense cities, where car ownership is popular, the profit opportunity is constrained by limited utilization.

 

One implication of this analysis: rumors of the demise of personal vehicle ownership may be greatly exaggerated. The unit economics of autonomous mobility simply don't make it a compelling prospect for people in suburban and rural areas.

So, when exactly can we expect to see more robotaxis on the road?

We expect autonomous technology to achieve "super-human" performance at the end of this decade. As this occurs, people in dense cities will likely sign up for subscriptions to robotaxi services offered by the likes of Waymo, Cruise and Zoox.

At the same time, people in less-dense cities, suburbs, and rural areas will probably opt for personally owned autonomous cars.

As 73% of American households describe their neighborhoods as suburban or rural, it's perhaps no surprise that both Waymo and Cruise have recently floated the idea of selling personally owned options.

Just last month, Waymo raised $2.5 billion in fresh funding, thereby bringing the company's total amount raised to more than $5.7 billion.

We believe such an aggressive raise suggests Waymo is gearing up to expand its service to additional locations. While years of operating subscale in a limited suburban location has helped to advance Waymo's technology, it hasn't led to a commercially viable model.

As a result, we expect the company is preparing to transition to a larger, more densely populated city—likely San Francisco, where higher ride volume can drive better operating metrics, and where it would come into more direct competition with Cruise and Zoox: