Robotaxi accounts for 60% of Tesla's valuation? Then Google's Waymo is severely undervalued

Tesla's highly anticipated autonomous taxi service, Robotaxi, has finally launched in Austin, but the small-scale pilot operation has instead highlighted the severely underestimated value of Waymo, the autonomous driving business under Google's parent company Alphabet. Tesla currently has a market capitalization of $1.1 trillion, with Robotaxi being a significant support for its valuation, while the more mature Waymo's latest valuation is only $45 billion.

On June 26, it was reported that Tesla's autonomous taxi, launched last weekend in Austin, Texas, is operating in a small urban area with fewer than 24 Model Y vehicles. This pilot scale is limited and lacks profitability. Nevertheless, RBC Capital Markets analysts stated that the robotaxi business accounts for about 60% of Tesla's valuation model.

In contrast, Waymo has deployed over 1,500 autonomous vehicles in five cities to provide services and just entered the Atlanta market this week. This comparison highlights the huge disparity in market valuations: although Tesla's stock price has fallen 19% this year, its expected price-to-earnings ratio remains as high as 150 times, while Alphabet's is only 18.5 times. Some Wall Street analysts believe that Waymo's reasonable valuation should reach $150 billion.

Robotaxi accounts for 60% of Tesla's valuation?

Tesla's current market capitalization exceeds the total of the next 20 automotive manufacturers globally. Although its stock price has dropped 19% since the beginning of the year, it still trades at an expected price-to-earnings ratio of about 150 times.

In contrast, Alphabet's expected price-to-earnings ratio is only 18.5 times, while traditional automakers like Ford, General Motors, Toyota, Mercedes-Benz, and Honda have an average expected price-to-earnings ratio of about 7.6 times.

RBC Capital Markets analyst Tom Narayan stated, the autonomous taxi business is crucial for Tesla, accounting for about 60% of its valuation.

However, this enormous valuation sharply contrasts with Tesla's current actual service scale.

Reports indicate that Tesla's Robotaxi's first commercial operation appears quite cautious. The service operates only in a small area of Austin, using fewer than 24 Model Y vehicles equipped with the latest full self-driving software, with operating hours limited from 6 AM to midnight.

More importantly, this service currently lacks profitability. Tesla charges only $4.2 for a single ride for the first passengers. Based on Texas's minimum wage of $7.25 per hour, this price barely covers the cost of the safety supervisor in the vehicle.

Tesla's dedicated Cybercab model, announced last year, is not expected to go into production until 2026, meaning the current service is still in the early testing phase. In contrast, Waymo has established a significant first-mover advantage in the autonomous driving service sector.

Waymo's scale advantage is obvious, valuation is severely underestimated

The company currently operates over 1,500 autonomous vehicles in five cities and just launched services in Atlanta this week Waymo plans to more than double its fleet size by the end of next year, thanks to its new manufacturing facility in Arizona.

Unlike Tesla's pilot service, Waymo has achieved true driverless operation, with no safety supervisors required in the vehicle.

Waymo completed a $5.6 billion late-stage financing last year, reaching a valuation of $45 billion, making it one of the top ten most valuable venture-backed companies globally. However, some Wall Street analysts believe this valuation is still underestimated.

Raymond James analyst Josh Beck stated in a report last month that Waymo's "base case" valuation is set at around $150 billion, with an expected average annual growth rate of 129% in total bookings over the next five years. Morgan Stanley also noted in a previous report that Waymo's revenue will continue to grow, with expectations that revenue will reach $1.79 billion by 2029.

Analysts believe this optimistic outlook is primarily based on Waymo's strong leading position in the driverless taxi service market and the partnership with Uber, which is expected to drive usage growth