Just days after a first-quarter earnings report that disappointed investors and sent shares plunging from $760 to below $700, Alphabet Inc (GOOG, GOOGL) announced that it’s getting serious about pushing regulators to get self-driving cars on the roads sooner rather than later.
Notably absent from the new coalition, which includes Uber, Lyft, Ford Motor Company (F) and Volvo AB (ADR) (VOLVY), were Tesla Motors Inc (TSLA) and Apple Inc. (AAPL).
Tesla is already a leader in autonomous driving technology, and Apple is thought to be working on an electric, possibly autonomous car of its own.
GOOG and AAPL are each coming off disappointing quarters, while TSLA reports first-quarter results on May 4 after the bell. The earnings from Alphabet and Apple highlight how both companies are struggling to have much success beyond one core area, and the rise of autonomous vehicles represents a compelling growth opportunity for each in the years ahead.
GOOG: Currying Favor in Early Innings?
The coalition spearheaded by Alphabet and co. is called the Self-Driving Coalition for Safer Streets. The group will work with lawmakers, regulators and the public to push for the safe and timely rollout of self-driving cars.
Uber and Lyft want the expedient acceptance of self-driving vehicles because they may one day eliminate the need for human drivers, which would obviously slash labor costs dramatically. Ford and Volvo are both working on self-driving cars themselves. But it’s GOOG that arguably has the biggest interest in getting self-driving vehicles on the road.
GOOG has been testing self-driving vehicles since 2009, long before mainstream industry thought it feasible or worthwhile. It makes sense that the company wants to expedite the process of getting self-driving cars on the road before the nascent industry becomes too crowded.
It’s odd, though, that TSLA and AAPL aren’t a part of the coalition.
Especially notable is TSLA’s absence, since it already sells cars with fairly remarkable autonomous driving technology. Newer Tesla S models can steer themselves on the highway, staying in their own lane without a human manning the steering wheel or pressing down on the pedals. The car can also park itself.
Perhaps Tesla CEO Elon Musk is simply reluctant to team with competitors. Plus, Tesla is still unprofitable and with so much of the company’s future revolving around the success of the mass-produced Model 3, due out in late 2017, there are other things to focus on.
Regardless of Musk’s philosophy on lobbying for the speedy adoption of autonomous vehicles, it’s in GOOG’s self-interest to help put together this coalition.
The counsel and spokesman of the coalition will be David Strickland, the former head of the U.S. National Highway Safety Administration — the very same government agency that will issue guidance to states, lawmakers and private industry on self-driving cars in July. Convenient!
Ultimately, Alphabet would love to diversify away from its cash cow, Google, and see some major scrill start to come from its “Other Bets”, which include moonshots like self-driving cars that may seem far-fetched at first, but have groundbreaking long-term potential.
While GOOG saw Other Bets revenue more than double to $166 million in the most recent quarter, costs also shot up, and it ran at an operating loss of $802 million in Q1, versus an operating loss of $633 million in Q1 of 2015.
At the end of the day, it seems like society is edging closer and closer towards a future where self-driving cars become a mainstream reality. But it’s not only technical and legal issues that remain. Serious ethical issues, like how algorithms should be programmed to function in life-or-death scenarios, abound.
As one of the companies that may end up writing that code, GOOG is smart to play an early role in the dialogue.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
