Waymo: Race against the regulators

Autonomous vehicles have become established on roads, mainly in Asia and South America, and there is no indication that they will disappear from them anytime soon. The pace of adoption of this technology supports the theses of enthusiasts of this solution, which is reflected in the valuations of companies in this sector.

Analyst coverage of this industry is comprehensive today. Most of them predict almost hyperbolic growth in the share of autonomous vehicles both in road traffic and in the structure of the entire automotive market. It is becoming increasingly clear that this segment is no longer a futuristic curiosity but is starting to play the role of a real growth engine for technology corporations and investors in the mobility sector.
Although for many, Tesla remains synonymous with autonomous vehicles, it is worth noting that a potentially serious competitor is slowly emerging on the horizon. Waymo, a subsidiary of Alphabet (Google), is developing in a more methodical, focused, and specialized manner than the market leader. This approach may pose serious problems for Tesla in the long term.

Source: Bloomberg Finance Lp

Source: Goldman Sachs

According to Bloomberg's analysis, the number of rides carried out by Waymo is expected to increase to over 6.5 million, while Goldman Sachs analysts estimate that the share of autonomous vehicles in total road traffic will exceed 7%, translating into a market value reaching up to $6.5 billion.
However, regulatory concerns persist. Even in the United States, a liberal country generally favorable to untested, potentially risky innovations in road traffic, the behavior of autonomous vehicles is raising more and more doubts.
To such an extent that the National Highway Traffic Safety Administration (NHTSA) has launched an investigation into nearly 2,000 Waymo vehicles. This number includes the vast majority of the company's fleet, whose exact size remains unknown. The investigation is prompted by reports of dangerous behaviors of autonomous systems near school buses, incidents that the regulator believes require immediate clarification.

For now, the market is reacting calmly. There are no significant movements before the market opens on Alphabet or even Tesla shares, but the NHTSA investigation itself is another risk factor that investors should consider in their valuation models.
Regulatory tensions around autonomous mobility may become one of the main sources of volatility in the sector in the long term, especially if further incidents or administrative decisions impact the pace of widespread implementation of this technology.

A serious accident involving autonomous cars and, for example, children could change the sentiment of society and regulators for many years. New restrictions and reduced demand could seriously shrink company margins and completely close markets less inclined to experiment with their road safety.