Valued at $30bn, Waymo considers its next move
Windfall pushing Alphabet division above rivals comes at turning point for group
When outside investors lined up this week to pour $2.25bn into Waymo, Alphabet’s self-driving technology division, it brought strong validation for a decade of work.
The deal valued Waymo at more than $30bn, according to people familiar with the transactions. That valuation, which has not previously been reported, makes Waymo worth considerably more than the $19bn assessment for SoftBank-backed Cruise, the autonomous vehicle unit of General Motors.
Created in 2009 as Google’s driverless car project, the company has since amassed the biggest fleet in the industry, with more than 600 self-driving vehicles, as well as accumulating the most miles driven and offering the only true — albeit limited — “driverless” ride-hailing service.
But the cash infusion comes at what could be a turning point for the company. Speaking in an interview with the Financial Times this week, John Krafcik, the former auto industry executive who runs Waymo, suggested he was in the process of reconsidering the kind of business he wants the company to be.
“Our role could be just focusing on the Driver” — the name given to its driverless technology — “and leaving the rest of the customer [experience] to others in the industry,” said Mr Krafcik, indicating a possible shift from bona fide self-driving car maker and robotaxi operator to supplier of autonomous-driving technologies to other companies.
He also suggested that a Renault Nissan alliance, announced with no details last year, could lead to the launch of driverless taxi services in France and Japan fronted by the carmakers.
“It’s possible the branding isn’t Waymo One,” said Mr Krafcik, referring to the nascent robotaxi service the company now runs in Arizona — the first service of its kind with paying customers, albeit with safety drivers monitoring some of the vehicles.
Instead, the services could leave the “customer touch points” with carmakers themselves, pushing Waymo into the background.
Mr Krafcik has hinted in the past that a similar approach might work in Italy with Fiat Chrysler, which already supplies minivans to Waymo to be fitted out as fully autonomous vehicles. Such an approach could provide a way to take Waymo’s technology global, with carmakers in the forefront.
“The world is changing,” he said. “Soon, the metric people will be focused on will not be the number of cars that are sold each year, but the number of trips taken or miles driven.”
The Waymo chief’s willingness to reconsider some of the most basic tenets of its business comes at a crucial moment for the self-driving industry, which is entering a period of consolidation as the costs of taking on its many facets become increasingly apparent.
The UK driverless technology company FiveAI this week joined the list of AV companies to scale back their ambitions, narrowing its focus to developing only parts of the artificial intelligence required. After it raised a far more modest $41m, chief executive Stan Boland said the capital needed for everything from integrating all the necessary technologies to negotiating with cities and regulators “is simply huge”.
He added that the result of these financial demands would be to leave only a handful of AV platforms — each made up of a “consortia of players or have unfettered access to large pools of capital”.
Among the players jostling for dominance with Waymo is General Motors, which has had commitments of more than $6bn for its Cruise division. Meanwhile, the ride-hailing company Uber and AV group Argo — now jointly controlled by Ford and Volkswagen — have also brought in multibillion-dollar investments.
“All of these companies are going to have to raise hundreds of millions, billions of dollars,” said Josh Wolfe of Lux Capital, a venture investor that has backed Zoox, which is building a driverless car of its own. “The good news is the enthusiasm is high and the field is narrowing.”
As important as the money Waymo has raised, according to Mr Krafcik, are the partnerships the company has been forging. Google’s driverless car ambitions have long been feared in the auto industry. Breaking down the distrust and building a network of alliances has become a high priority — one reason why the Waymo boss has been considering new ways of doing business alongside the carmakers.
Some of these partnerships have now been sealed by an investment, including one with the parts maker Magna International. This points to one way in which the company may evolve, as it sheds its involvement in hardware to focus on the brains and operating system underpinning driverless cars.
Mr Krafcik said that while it has been a key part of Waymo’s business to design the hardware and own the intellectual property behind the sensors in its vehicles, “it needn’t be that way going forward”. Magna could take over parts of that work.
Narrowing its focus on the core technology could turn Waymo into a pure tech company offering a range of services to carmakers, said Mike Ramsey, an analyst at Gartner. That could make its business more akin to the massive cloud computing platforms that Google and a handful of others have built, he added, working in the background to supply much of the computing power and AI on which other businesses depend.
Investment from the car retailer AutoNation, meanwhile, has served to highlight Waymo’s aspiration to deliver goods as well as people. It already carries parts for the car retailer, as well as having a partnership with the delivery service UPS. This week it announced a new service to ship goods, called Waymo Via, making this its second nascent commercial operation, after Waymo One.
For his part, Mr Krafcik does not rule out the possibility of getting out of the consumer business — but he also does not dismiss continuing, and clearly has no intention of giving up on potentially huge new markets that have barely begun to take shape.
“The future is very unclear,” he says. “One of the things we hold dear is to maintain optionality.” With billions of dollars in the bank and everything to play for, it does not make sense to narrow the horizons quite yet.