In 1994, 27-year-old Microsoft Corp. (MSFT) product manager Rich Barton pitched a game-changing idea to Bill Gates and other executives…
What if you could take travel booking… and move it online?
The result was Expedia Group Inc. (EXPE), a project that would debut in 1996 and become a standalone company in 1999. By acting as a one-stop shop for travelers, Expedia’s website would become an even more popular online destination than the airline and hotel companies it served.
Today, four of the five most visited travel sites in the United States are aggregators like Expedia, and their combined market value exceeds $235 billion – more than the value of the Top 10 most valuable hotel and airline companies put together. In fact, every major U.S. airline still trades below their January 2020 levels, while Expedia has pushed ahead.
The reason is that people love convenience.
Why check a half-dozen airline websites for a Christmas flight when a single visit to Expedia can immediately give you the cheapest options? And though airlines have fought back with rewards programs and exclusive web-only offers, Expedia and other online aggregators still remain far more valuable for their ability to pick the best options across all vendors.
The same truth will soon emerge in the self-driving vehicle world…
The Self Driving Revolution
On October 10, Tesla Inc. (TSLA) is widely expected to announce plans to become its own “vendor” of robotaxi services. If this is the case, they will join Alphabet Inc. (GOOGL)-owned Waymo and General Motors Co. (GM)-owned Cruise in offering autonomous driving ride-hailing services.
This will be game-changing for EV firms.
Automakers have long known that cars are parked roughly 95% of the time. Most vehicles are needed on demand, and we simply leave them in driveways and parking lots because they can’t move themselves.
But what if they could? A single vehicle could theoretically drop one person off on a morning commute… then swing back home to take another family member to buy groceries… and another to daycare… and so on. There would suddenly be no need to have 1.8 cars per household when you can share a single vehicle with multiple family members or neighbors.
Consulting firm Oliver Wyman estimates that driverless vehicles could reduce net car demand by as much as 15% by 2035, even if the number of people using cars go up. It’s no wonder why companies like GM are willing to rush the development of their self-driving vehicles… even after causing disastrous high-profile accidents. Losing out on the self-driving revolution would be disastrous for carmakers, given the high fixed costs of production.
The stakes for automakers will grow even higher as Tesla steps in. They know that the EV firm has a history of muscling out slower-moving competition; one in every two EVs in the U.S. are still Tesla-built. And if Tesla owners become able to rent out their cars as taxis, then Detroit automakers had better offer a similar technology if they expect to survive. (It’s also one reason why Eric’s not recommending any of these carmakers like General Motors (GM) quite yet.)
Meanwhile, ridesharing firm Uber Technologies Inc. (UBER) sold its self-driving unit in 2020 because the company realized it’s mostly immune from getting replaced by self-driving vehicles. Instead, Uber and other rideshare firms stand to benefit from self-driving technologies because they can quickly become a marketplace for these services, like Expedia. Why buy a Tesla Cybercab – or join some sort of co-opt – when an aggregator like Uber can send you the nearest car (of any model) for the cheapest price?
Most American travelers are more interested in the deal they’re getting than the airline they’re flying or the name of the hotel they’re staying at. And if companies like Uber play their cards right, they would be the ones who benefit most on the road to full autonomous driving, rather than the automakers who finally perfect the technology.
In fact, when Uber looked to replace their controversial founder Travis Kalanick in 2017, they picked Dara Khosrowshahi, who at the time was running… you guessed it… Expedia.
The Even Bigger AV Bet
However, Uber isn’t guaranteed to succeed in autonomous driving. Though it’s been dealt a great starting hand, the ride-hailing firm still needs to navigate an incredibly complex set of deals with a few powerful vendors. If Tesla refuses to join a shared network, for instance, Uber could find itself struggling to attract other suppliers.
Uber will also have to manage its transition from human-based drivers to autonomous ones. They will go from dictating terms against thousands of drivers to negotiating against the top lawyers in Silicon Valley and Detroit. The ride-hailing firm’s current profitability is not guaranteed in the future.
That’s why I’m excited to share that InvestorPlace Senior Analyst Luke Lango might have found a company with an even better chance of success. In a presentation on Monday, October 7, at 10 a.m. Eastern time, Luke will introduce this little-known company that could rise as much as 20X (sign up here).
This firm is currently supplying Elon Musk with a technology that might play a key role in his robotaxi. It’s already attracted large investments from the likes of billionaire Daivd Shaw and venture capitalist Peter Thiel. And best of all, its low starting price leaves the door open for enormous gains that were once only available to private investors.
It’s an event you won’t want to miss. You can click here to reserve your spot.
Regards,
Thomas Yeung
Markets Analyst, InvestorPlace
