Written by Ophir Gottlieb
ALPHABET INC (NASDAQ:GOOGL)
Alphabet Inc (NASDAQ:GOOGL) made self-driving a real business, very quickly. The company is a Spotlight Top Pick for many reasons which we detail in the Top Pick dossier "Google Has Turned on the Growth Engine."
More recently we wrote a piece "Wall Street is Blind to Google's Upside Potential," in which we detail the early success of the Google Pixel smartphone as well as a broader view of the smartphone market in general which the main stream media has misinterpreted rather painfully.
But, today, we talk about Alphabet Inc (NASDAQ:GOOGL) and its newest venture that has gone from "moonshot" to real business, and it has done it very quickly.
SELF-DRIVING CARS
In the last few weeks Alphabet Inc has spun out its self-driving car segment into a stand-alone company, still under the Alphabet Inc umbrella, called Waymo. Before we dig into the details, a quick step back. This is the expected growth in the market for self-driving featured cars:
We're looking at 134% compounded-annual-growth rate for the next five years ending at 10 million cars by 2020. But Google wants to create totally self-driving cars - not a vehicle which features self-driving capability.
For the longest time this project felt like one of the many moonshots that would never really see the light of day -- that's what Wall Street would have had us think, at least. But it isn't a moonshot, it's a business -- and a rather large one.
Months ago Alphabet teamed up with Fiat Chrysler to put its self-driving technology in a 100 Chrysler minivans. This serves as both a test for the self-driving car technology, and the earliest part of a potential blockbuster deal. But before we turn to that, we got bigger news.
"Honda Motor (HMC) said Wednesday that it is in formal discussions with Waymo, the self-driving stand-alone unit of Google parent Alphabet (GOOGL), to add its autonomous vehicle technology to Honda vehicles."
Source: BARRON'S
Yeah, Alphabet Inc (NASDAQ:GOOGL) has now partnered with Japanese auto giant Honda. Here's a quick quote from Honda, and then, the bigger news which yet again, Wall Street appears to be missing.
"This technical collaboration between Honda researchers and Waymo's self-driving technology team would allow both companies to learn about the integration of Waymo's fully self-driving sensors, software and computing platform into Honda vehicles"
Source: Honda
Now, Honda previously announced its intention to put production vehicles with automated driving capabilities on highways sometime around 2020 related to its goal of a collision-free society. But, Alphabet Inc has gone further.
It was lost in the wind of headlines, but Alphabet has already started talks with General Motors and Ford as well. Now, imagine for a moment that the self-driving revolution, which is coming much sooner than Wall Street understands, is driven by Alphabet's technology. Yeah, Tesla will have their cars, and likely Apple as well, but Chrysler, Honda and possibly other manufacturers partnering with Alphabet Inc could mean a leader has already been established.
Let Tesla sell its 500,000 cars by 2018 if they can. Alphabet is looking to sell tens of millions within five years, with no cost of production, no assembly line, no radical new business -- just the best technology in the world licensed to the largest auto makers in the world. Now, this isn't done but it's definitely starting and Wall Street is miles behind (no pun intended).
For my view on self-driving cars, Tesla and the future, you can watch my recent interview on CBC with Peter Armstrong, below:
In short, this technology is coming, and it's coming much (much) faster than Wall Street understands, in our opinion.
We re-iterate our Spotlight on Alphabet Inc and see wonderful potential to grow its business well outside of digital advertising into smartphones, self-driving technology and many more areas.
Thanks for reading, friends.
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