Transcript: Scaling Autonomous Vehicle Fleets: Opportunities and Challenges

Executive Summary

In this episode of The Road to Autonomy podcast, Grayson Brulte sat down with Sergey Litvinenko co-founder and CEO of Koop to discuss the autonomous vehicle industry’s shift towards a fleet-based model due to the immense capital required for scaling operations. Sergey explains that this model, similar to the airline industry, will create a diverse ecosystem of operators but faces major hurdles in financing and, most critically, insurance underwriting. Overcoming these challenges is the key to unlocking the economically viable and scalable future of autonomy.

Key The Road to Autonomy Episode Questions Answered

Key The Road to Autonomy Topics & Timestamps

[00:00] Why the Autonomous Vehicle Market is Shifting to Fleets 

The shift toward autonomous vehicle fleets is driven by economics. Scaling to tens of thousands of vehicles involves a massive amount of money that no single entity, not even a company like Google, can handle on its own. This realization has led to the industry embracing a fleet-based model to distribute the financial burden.

[01:00] The Airline Industry Analogy for Autonomous Vehicles

The autonomous vehicle market may evolve similarly to the airline industry, which has a few major manufacturers (Boeing and Airbus) and thousands of operators. In this model, there would be a handful of AV manufacturers in the US, Europe, and Asia, with thousands of different fleet operators worldwide managing the vehicles for various services.

[05:00] Fleet Ownership and Financing Models 

While autonomous vehicle developers like Waymo may own their vehicles in the short term, scaling to hundreds of thousands or millions of vehicles will require outside capital. Two primary models are envisioned: large fleet companies with enough capital to buy or finance vehicles, and third-party investment companies that will own the vehicles purely for the cash flow they generate.

[11:00] Comparing the Tesla vs. Non-Tesla World 

A distinction is made between Tesla’s vertically integrated model and the rest of the industry. Tesla aims to become a “master fleet operator,” allowing individual owners to add their personal vehicles to the Tesla network. When a car is on the network, it operates as part of the Tesla fleet, with Tesla taking responsibility. This approach is considered different and “exotic” compared to the non-Tesla model of distinct developers, owners, and operators.

[14:00] The Challenge of Personally Owned Waymo Vehicles

While the idea of a personally owned Waymo vehicle has been raised, significant hurdles exist. The biggest challenge would be the deep and complex technical integration with a legacy OEM’s vehicle architecture. This integration could take years, during which time a competitor like Tesla might capture a significant portion of the market.

[18:00] Will OEMs Partner with AV Developers? 

Original Equipment Manufacturers (OEMs) face a choice: either develop autonomy themselves to capture high-margin software revenue or stick to manufacturing vehicles. While partnerships with autonomous driving developers such as Waymo or Wayve are happening, it’s unclear how the OEM will make money from the software in such arrangements.

[22:00] The Single Biggest Challenge: Insuring Autonomous Vehicle Fleets 

Insurance is described as the biggest “party pooper” for scaling autonomous vehicle fleets. Commercial auto carriers do not know how to underwrite autonomous vehicles and tend to apply expensive human-driver rates, making the economics unviable. A new, significantly modified auto insurance product is needed, one that is approved at the state level and reflects that the software, not a human, is the driver.

[33:00] Other Key Challenges Beyond Insurance 

Besides financing and insurance, a key challenge will be the technical capability of fleet managers. Autonomous vehicle developers will likely push significant responsibilities onto the fleets, including complex tasks like software updates. This requires fleets to be tech-enabled and have the talent to manage these responsibilities effectively.

[36:00] The Future of Autonomous Vehicle Fleets 

The future of autonomous vehicle fleets is considered “bright” and the primary method for commercializing autonomous vehicle services. This model is the most economically viable because it prevents over-concentration of capital in one company and allows for a clear separation of responsibilities, similar to the airline and trucking industries. The result will be a scalable system that fosters competition and innovation.

Full Episode Transcript

Grayson Brulte: Sergey, sir, it’s great to have you back on the road to autonomy. You offer incredible insight. You’re the world’s best sponsor, so thank you for sponsoring this week in the Autonomy Economy. It’s powered by co. It makes it happen. Today we’re not here to really talk about insurance. Sergey. We’re here to talk about. The shift that’s happening in the autonomous vehicle market, it’s moving towards fleets. What’s causing this shift? 

Sergey Litvinenko: Thank you for, uh, having me, Grayson, and thanks for producing the best content in the autonomous vehicle industry. Uh, well to answer your question, , the simple answer is, economics and I think I. It’s, it’s finally happening because people realized that scaling autonomous vehicles to tens of thousands of vehicles is gonna involve a lot of money. And there is not a single party that can handle all of that, even if you have all the money in the world like Google. , so now we are finally seeing a move towards, autonomous vehicle fleets and, , you know, back in the, well, I’m not gonna say back in the day, but. A couple years ago, if you recall, there was a GM cruise presentation. Unfortunately, cruise is no longer with us. But, I remember they had like a chart where they showed the plan how they’re gonna scale and the, you know, the first phase was cruise owned, vehicles operated, et cetera. And then there was like a hockey stick with third party fleets going like this, vertical. And , I think we’re just at the beginning of that hockey stick and fleets will make it happen.

Grayson Brulte: Well, who do you see operating the fleet, owning the fleet, managing the fleets? Because the more I research this, the more I study this, it seems like it’s a whole ecosystem is going to evolve around fleets.

Sergey Litvinenko: the fleet model is insanely versatile. You know, before I answer your question about autonomous vehicles specifically, just to put some numbers in perspective, , I’m not the first one to talk about this, but I. Autonomous vehicles might resemble the airline industry where you have a handful of manufacturers, let’s say Boeing and Airbus, , and then you have a lot of airline fleets or operators. I actually looked up some, some stats to, for the audience to put things in perspective. There are two major commercial airline manufacturers, Boeing and Airbus, and you wanna guess how many airline operators in the world? 

Grayson Brulte: 10 to 12 majors.

Sergey Litvinenko: In total it’s three and a half thousand, but top a hundred, they make up the, the, the most of the market share of course. But you know, it’s three and a half thousand operators. There’s probably almost 4,000 airports. So it just tells you that, how diversified the fleet model is, and I think the same. Might happen with autonomous vehicles where you’ll have a handful of manufacturers, maybe a couple in the US and maybe a couple in Europe, a couple in in Asia, and then there is going to be thousands of fleets all around the world doing all kinds of things. And my bet that most likely there are going to be new entrants, like pure play, autonomous vehicle fleets, , who will be tech first, who will have, , not just the ability to, you know, clean vehicles, change tires, check the hardware, but also, , do the software updates, do the vehicle retrievals and things like that. And there are gonna be legacy players, , , in the, kind of passenger vehicle space. It could be a company like Hertz, but I don’t know if they’re doing anything there in the trucking space. , it’s of course way more laid out. The fleet model is gonna be like big fleet operators and owners there. So I, I’ll, I’ll bet my money on pure play AV fleets. I think this model is gonna be exciting and I know like Waymo has already moved, made a move in that direction, which is great to see.

Grayson Brulte: You mentioned Hertz. The CEO of Hertz is a wonderful gentleman, actually, listener of the podcast, and it’s been on the podcast several times. Gil West, former COO of Delta, also COO of Cruise. Mr. West’s specialty is Fleet, so I wouldn’t be surprised at some point. When he gets rid of the legacy architecture at Hertz to see can potentially m move into fleets? Staying on the airline theme, do you see a point where we have the big three in America? You have United, you have American, you have Delta, and then you have smaller ones with JetBlue, and then you have regionals. Do you see the autonomous vehicle fleets potentially evolving that way? We have a big three or big four, and then you have a lot of smaller, let’s call regional players that fallen below that.

Sergey Litvinenko: if a reason by analogy, the answer is yes, so most likely there is going to be a. Handful of big, , AV fleet operators. They’ll probably control most of the locations, most of the market. They’re going to have relationships with big ride share and platforms. , and we can touch upon that separately. And then there are gonna be, like local, maybe even hyperlocal fleets that will operate with a specific user experience or a specific location in mind. For example, there might be a player who takes, , who maybe has, Waymo vehicles and serves suburban areas, and they have the garage and location somewhere in the suburban area so the vehicles don’t have to go back to the city, and then go like 20 miles out to, you know, pick up and drop off passengers. Like you can service as the sub, sub suburban areas, but then of course the economics have to work. , or you can go and do some. Private service, for example, you might service as private corporations. And if you are, , let’s say PepsiCo or Google or ExxonMobil and you have private campuses and you have employees here and there, you know, instead of the shuttle, you can have a build a fleet that will manage the, employee service, robotaxi service right there. And, you know, it could be all kinds of things. So, i, I think, I think the, , opportunity for smaller fleets to appear is gonna be great in, , in autonomous vehicle space. Of course, we’re gonna have problems with like financing and most likely insurance, but, all of that is solvable.

Grayson Brulte: When you look at the QSR, the quick service restaurant industry, you have McDonald’s, you have Wendy’s, you have Chick-fil-A, all taking different models, where McDonald’s franchisees, the real estate is owned by McDonald’s. Wendy’s, the real estate is owned by individual franchisees. And if you look at the Chick-fil-A model here, if the franchisees is just basically operating it, , very low cost upfront for them, the the profits are going back to the Chick-fil-A. So do you see similar models like that evolving? ’cause the cost of to fund this is gonna be astronomical McDonald’s model. Waymo could be the real estate owner and the franchisee could be the operator. Could that possibly mer this? because based on alphabet’s balance sheet.

Sergey Litvinenko: I think in the short term, by the short term, let’s take the next three to five years, so until like 2030 or so. Waymo will probably own a considerable autonomous vehicle, real estate, meaning vehicles, both for testing commercial operations, and,. They could have a fleet, partner still own the vehicles and, , they, they can afford this. But if you think about scale, I think, scaling, not, it’s not just tens of thousands of vehicles. It’s hundreds of thousands of vehicles, maybe even millions of vehicles. , I don’t think there is a balance sheet in the world that can afford that. So you’ll have to figure out how to attract capital to this. Now, there are two ways I. I, I envision the world will will work in autonomous vehicle fleet space is that there are gonna be fleets with a lot of money Who can own those vehicles? Okay, well, they can buy them, or they can actually finance them. They’re gonna go take a loan out and pay a. Monthly payments to the bank. So do the financing or the leasing model, or there could be another party in between the, , developer and the fleet. , that is only going to be the owner and they just gonna buy the vehicles. Okay. , it’s not gonna be a bank, but it’s gonna be more like, you know, a third party, like an investment company. And that investment company will have a, uh, motivation of owning the cash flow coming from the, autonomous vehicle business. And then there are a bunch of things they can do with that, but I think it’s gonna be two of those models. , most likely in the short term, we’re going to see some big fleet players appearing and they’ll just have enough money to buy AVS or to finance or lease them work. We’re work it out with a bank. And then right after that, we’re going to have a new party appear with a business model of just owning autonomous vehicles for the sake of cash flow generation. But that’s gonna happen. Closer to the moment when there is a, some market penetration and cash flow maturity so that you can predict the cash flows, , then the investments, the investment management companies will flock into the market as well. That’s, that’s my view.

Grayson Brulte: That your view is spot on. That opens the view to what I’ve spoken quite a bit about is autonomous vehicle. REITs. If you look at you, the cell phone towers in REITs, real estates are in REITs and investors like that ’cause because of the free cash flow that they spit off. What then, let’s throw another monkey into the wrench here. What happens when an individual starts buying up vehicles and wanting to put them into services? See an individual either through an LLC, pulls money, buys a hundred buys, thousand, says, okay, I got ’em and puts them onto the network. How does that happen? How does that work? 

Sergey Litvinenko: Well, if that happens, then the individual will become a fleet owner operator. So, you know, I mean, you can have a couple of vehicles or you can have a couple hundreds of vehicles. You become a fleet owner operator. So everything we discussed. Applies to that person, especially if you have a actual company form. I guess, you know, the challenge is gonna be okay if I decide, let’s say I have a few million dollars laying around and I want to open a Hyperlocalized autonomous vehicle service. I wanna work with Waymo. I want to have my thing available on, let’s say, via app. Maybe because it’s simpler to work with them and they service the suburban area. Okay, I have that. Now I need to go figure out the contract with Waymo, with Via. I need to figure out where I’m gonna garage this. I need to figure out my scope of responsibilities. Okay, what am I supposed to do? You know, I. Is it just the hardware maintenance, or do I do need to do anything at the software level? I need to hire staff. The staff needs to be knowledgeable about how to operate autonomous vehicles. I need to have a tool where I can manage all my avs. Am I gonna have control over routing? Or is it gonna be done full autonomously? Okay. If a a, an autonomous vehicle gets stuck or gets into an accident, who’s gonna retrieve that vehicle? As a person, you’ll have to figure all of that out, and most likely early on it’s gonna be challenging because there’re gonna be no suppliers in that space, but I think it’s gonna develop pretty fast. So you’ll have options to work with. And then at the end of the day, you’re gonna get a check from your autonomous vehicle operations, making money for you. But everything I described has to be figured out. , it’s, it is great to see there is some early entrance in that space, , who are already making the first step, but I think there is a long way to go before a person will be able to deploy a couple million bucks in a way where it’s not gonna be a nightmare for the person.

Grayson Brulte: What if the individual just says. I have, I have the balance sheet. I wanna purchase vehicles. I don’t wanna manage ’em, I don’t wanna operate ’em. I just wanna collect a dividend for the operations. Where do they go? Do they call a move or do they call an Uber? Do they call a Lyft? W? Where do they go? 

Sergey Litvinenko: Good question. , well definitely not gonna call Uber or Lyft because I think Uber and Lyft, they will be, , more like the, customer access platform, you know, for those fleets because they own the customer base. And I think move probably is more vertically integrated, meaning that the move will do those things itself and will want to make money itself. There might be like a, uh, new kind of company that will provide, that will, so if you’re, if you decide to start to deploy capital and you want to be a AV fleet owner operator, you might have like a third party who can provide you with the infrastructure for it. So it’s like plug and play solution. It’s like white label, fleet management model, you know? But I don’t think anybody is doing this. And, uh, it kind of makes sense because I don’t think we’re there yet that people will be able to just take, you know, a hundred or maybe 50 to a hundred vehicles and do that, like as a, as a side business. , but I wouldn’t be surprised if that happens. Uh, actually a company like Move might be positioned for it because they’ll have all the infrastructure. They might just decide to spit it out in more like white labeled way or something like this. . Interesting to see what is gonna happen, but honestly, I don’t think it’s gonna happen soon. I think we have to reach a certain maturity point until individuals can to decide, can, will we’ll be able to deploy a couple million bucks for a hyper localized AV service.

Grayson Brulte: There’s chatter brewing for this on X. There’s individuals that have been longtime Tesla investors that have the balance sheet based on their Tesla investments to finance a fleet of cyber cabs or model Y, which we learned on the earnings call that they’re gonna deploy. If they do that, who’s gonna clean them? Who’s gonna make sure that they meet the safety inspections? Who’s gonna make sure the tires are rotated? Who’s gonna handle the, I’ll call the nitty gritty details that have to be done to truly operate this? 

Sergey Litvinenko: we need to make a very important distinction. , there is a Tesla world and there is a non Tesla world. Up to this point we were talking about non Tesla world. Okay. Which I think, um, probably most of the world will operate with, with that model. Tesla is special, because Tesla does everything in a vertically integrated way. So I think, , if the original vision of the of of Elon. Comes to fruition where you, even if you have your own personal vehicle, just one vehicle, you’ll be able to make it a part of the network that is gonna be different from how the rest of the world is gonna do it, just to be extremely clear. Okay. I, I, I think those two models are in competition. Both of them can exist. Both, both of them can be worth trillions of dollars. , but they’re different. And, with Tesla, the way I envision this is gonna happen based on the. Publicly public information available is that Tesla is gonna become like a, master fleet operator. It’s a master fleet operator where you’re gonna have individuals and those individuals can literally like. Come and go from the platform, but Tesla is going to become a fleet owner operator. Okay? So when the vehicle is in autonomous mode on the Tesla, on the Tesla network, it’s a part of a Tesla fleet. Tesla’s gonna be responsible, okay? And then when it’s off, it’s gonna be your vehicle. You go clean it, you go fix it up, and then you bring it back, something like this. But this model is gonna be exotic, it’s gonna be unusual. And, uh, I, I, I mean. I personally can’t wait to give it a try. I think it’s gonna be awesome. I just hope it, works out the way it’s intended.

Grayson Brulte: Could you see Uber, Lyft either? Acquire a company or set up a subsidiary to mimic this model if it is proven to be successful over time.

Sergey Litvinenko: I think when it comes to Tesla’s gonna be challenging. I. Other vehicles Sure. But other personally owned vehicles that are capable of self-driving other than Tesla out there? I, I don’t think so.

Grayson Brulte: Not yet, but, but there’s a big, but this threw me for a loop on Alphabet’s Q1 earnings call last week. Sundar Phai opened the door to the potential of a personally owned Waymo vehicle. If that happens, the technology’s been proven. You got a very clear path there.

Sergey Litvinenko: let’s assume just a thought experiment. Let’s assume the, , cost of all the hardware that goes into making a waymo possible, becomes so cheap that, , Waymo is just a little bit more expensive than a camera only vehicle. Okay. And let’s assume that the computing costs also become very, very cheap, meaning that the cost doesn’t become an issue. I think the biggest hurdle will be the integration with the OEM because okay, if you want to sell personally owned, , vehicles and have them Waymo install, you’ll need to figure out an OEM to integrate with that integration. Could be a hell of a job, in my opinion. And I know that, I know that OEMs are. Legacy OEMs, meaning that their, their architecture and their tech stack is not the latest. How much of a battle that is going to be, how, how much time this is going to take. I’m concerned about that. And by the time they figure it out, you know, Tesla is gonna be running, you know, hundreds of thousands of AAVs on this platform. So it, it’s, it is possible. I just think, you know, the. The integration is gonna be messier than we think, and by the time they figure it out, the market might be taken, , in a good part, by the way, uh, by, uh, by Tesla. So that’s just my concern. , yeah, I might be wrong. I hope I’m wrong. I, I hope it’s a, it’s, it’s a quick thing to figure out, but I, something is telling me it’s not.

Grayson Brulte: You’re right about a lot of what you said. If you look at the integration, so we have public statements that Waymo will take possession of the the Waymo Hyundai vehicles in 2026 for testing. They’re being built in Savannah, Georgia. If you look at the plant and you, and you look at schematics, there’s ability for that plant to make personally owned vehicles. But, and I say this with a big caveat here. Hyundai has a company called Motional. And Motional. We do not know anything besides Aptiv pulling out the joint venture. I’ve said publicly when you’re actually on the podcast that that will become. A personally owned vehicle for Hyundai. Did we get to a point inside of Hyundai where Waymo’s competing against their internal motional stack for personally owned avs? 

Sergey Litvinenko: good question. , I will say, based on the public information about Honda and Waymo, I know that. Hyundai provides the vehicle, right? So, , when you have autonomous Ioni fives, Hyundai is not gonna make money from the software. So it’s just gonna be, it’s just gonna be, Hyundai is gonna do what it does the best. It’s manufacture vehicles, I’m pretty sure Hyundai, would love to generate, , you know, highly marginal revenue from the software business at some point. They can’t do it with Waymo, they have to do it themselves. So the best bet is to do it through Motional. So then, yeah, uh, if you have two vehicles, one with Waymo Stack, one with Motional Stack, they, they, they’re gonna compete. , I, I, I honestly, I, I’m pretty sure it’s probably more complicated than this. , but, personally, if, let’s say Hyundai wants to move into the personal AV space and they want to make money from the subscription. AB service subscription, then they’ll have to figure it out themselves and maybe they’ll have a better chance, at delivering this than doing this through the integration with Waymo. Honestly, hard sell. It’s just, it’s just, you know, kind of guessing at this point. But yet even in the best case scenario, if, let’s say. Waymo decides to enter the personal market space to figure it out with Honda, which I’m pretty sure it’s not gonna, it’s not gonna be that easy. By that time it can be years, you know, years from today.

Grayson Brulte: It’s years if you, but if you look at OEMs getting tied up with, with autonomous driving developers, Nissan has a now a newly announced partnership with Wave that gets very interesting. Nuro is out there in the market and there at some point I fully expect them to get an OEM deal. Do you see a point where all the major OEMs at some point in the future, I’m not asking for a timeline here, have a, an autonomous driving partner because of what they’re gonna see for the demand that’s coming from the market where consumers want this technology.

Sergey Litvinenko: Probably yes. I think if you are an OEM and, , I unfortunately didn’t work at Big OEMs. I wish I had a more of a corporate insight and see how boards think. , but there are kind of the, the future is gonna be, I. Somewhat binary. You either gonna do autonomy or not. And if you don’t do autonomy, you’re just gonna default to what you have done previously, is that you are gonna manufacture vehicles, okay? And, uh, if you do autonomy, that is going to be a heavy r and d ticket that you have to, uh, that you, that you have to pay for. But it might pay off because you will become not just the, manufacturer, you’re also gonna become the service provider. And the service equals software as a service and software equals highly marginal revenue. So, pretty much OEMs that decide to move with the, an autonomous vehicle space, they definitely have a shot at, at, at being there in the future. And, you know, I’m very bullish on Tesla, very bullish on Hyundai. , I’m not sure about European ones bullish and Chinese ones a hundred percent. Japanese ones seems to be making the right the right bet with wave. But, so, you know, that’s good. But let’s say when you have a deal with Wave or you have a deal with Waymo or a deal with any other AP developer how the OEM is gonna make money from the software. That I’m not clear. So, , I guess we’ll have to see. I guess nobody knows because nobody has done it before. And when we have a precedent, we’ll know better, but I was pretty sure, uh, just a quick comment, I’m. Pretty clear how Tesla’s gonna make money from this thing because it’s vertically integrated and you can just kind of see where Tesla’s interest is and how they’re gonna compensate their network when there is a developer and an OEM, and then there’s gonna be a fleet, , that, that model makes sense. But I, I don’t think we have had a precedent yet, so we do not know yet how, how the money is gonna work out for OEM specifically.

Grayson Brulte: We don’t know how the money’s gonna work out yet, but we do know very clearly an ecosystem is gonna merge. You’re gonna have the OEM, you’re gonna have the autonomous driving developer, you’re gonna have the platform, the Uber or Lyft, and then you’re gonna have the management layer, and then after that you’re gonna have the finance layer. Do you see specialty companies emerging on each piece of the layer to servicing that little niche? Or do you see somebody trying to do a roll up and vertically integrate something? 

Sergey Litvinenko: We’ll probably see both. . I’m pretty sure there are gonna be like auto financing companies who enter the autonomous vehicle space. They’re gonna be the new entrants who do just that. , it’s, you know, that’s how a, an industry emerges. You know, you have a, uh, a new technology. New technology provides a new way of doing things. Totally New economics, maybe new user behavior. Then there are new entrants, then some of them die, some of them become big. Then the, , legacy entrants come in and then they split the market in. Why one or another way. But yeah, I’m, I’m honestly not too worried about financing. I think financing is well. Uh, as long as you know or can predict the cost of the vehicle and all the hardware and the utilization of the vehicle, and of course, you know, the location where, and what kind of service is gonna perform. I think you can model out the vehicle, like the vehicle lifecycle and how much money it can produce and stuff like that. I think that’s pretty straightforward. , I would say insurance is less straightforward. Insurance is gonna be a huge component as well. , but financing is something that I expect. It’s probably already, there’s probably already a company or two that, that can make this happen today.

Grayson Brulte: You’re going to get fragmentation and that’s really good for Uber. It’s really good for Lyft ’cause it talks about the value of their platform. You alluded to it, insurance. How the heck is this going to be insured? Do you have to develop a Koop? Do you have to develop new insurance underwriting techniques? Do you have to partner with the fleet manager, partner with the platform provider? How are you gonna ensure this, I’ll call it this evolving complex ecosystem.

Sergey Litvinenko: well insurance is gonna be a problem and thankfully there are people working on that problem. Not a lot, but, you know, a couple is enough to change, to change something like this. , you know, in the insurance industry it’s important. It’s important to follow the model. We’re going to have a bifurcation of the model where there’s gonna be an autonomous vehicle developer. It’s the company that develops the software. They also develop the hardware necessary to make the self-driving possible. There is a lot that goes into how all those things work together. , so take Waymo, right? That’s, that’s Waymo. Waymo can figure out its insurance. It can be either self-insured. Fully self-insured. It can be partially self-insured, , with some additional insurance purchased on top. , and they can figure it out. It’s, for the most part gonna be product liability. It can be product liability with a mix of like cyber liability. , and uh, maybe some additional things here and there coverage wise. Now, let’s take a look at a fleet. I think fleet is where we have like a huge halt when it comes to insurance. , I’m a fleet owner operator. Let’s say I buy those Waymo. They are on my balance sheet and I’m gonna provide a service, you know, and I have a, uh, ability to, provide a service in multiple cities. I have an ability to manage those vehicles in real time, and maybe I can do some, many, many other things, okay? But those are my vehicles. This is my service. , I can’t put those vehicles out without insurance. And, uh, the developer Waymo definitely doesn’t want to expose themselves to something like this because, you know it’s gonna be a problem for their balance sheet. So I have to go purchase insurance and I, I, I go to commercial auto carriers and they’re gonna be like, most of them will probably decline because they have no idea how to underwrite this. , but some of them which are willing to put out their commercial auto product will probably rate it like a regular auto. Regular commercial auto insurance is literally insane. You know, it can be not just thousands of vehicles, it could be tens of thousands of vehicle of, , dollars per year per vehicle. And just economically it’s super expensive, especially in places like, New York Commercial Auto is just bunkers so. But it’s not a human driver, you know? So, but the carriers will provide you the human rates. So it becomes a problem where it’s Waymo’s software driving. They have the data that it’s a much better driver than a human, but there is no insurance company that’s willing to reflect that in their auto rate . the economics of the autonomous vehicle fleet operator becomes kind of crude. Just because of insurance. Just because of insurance. And I think insurance will be the major, , party pooper for autonomous vehicle fleets. So the way you figure it out is that you have to create a new product, , a new product where its first has to be an auto product that will somehow reflect the fact. That this is just the, operator and the actual driving is done by the software, which is already insured by the Waymo. Of course there has to be the relationship between the fleet and the developer. Figure that component out. And then that auto has to be complimented with additional things like cyber liability or errors in emissions or maybe umbrella policy, just to make sure to make sure if there is a, something happens and it’s not covered by commercial auto, that there are additional lines of insurance you can pull into this. So, you are not exposed. It has to be a new auto product or like a significantly modified auto product with some complimentary lines of business and it doesn’t exist today. So far, I know only two parties in the world thinking about this, and one of them is Koop.

Grayson Brulte: you’re inuring the future. But we don’t like party poopers on this. We like party animals, so I’m gonna take it to the party. I’m gonna go from the party pooper to the party animal on here because I got an idea that popped into my head and you could say I’m crazy, but I’m gonna throw it out at you. What if I purchased the autonomous vehicle as part of that purchase? My insurance is bundled in. My fleet management, partner is all bundled into that for one fee. You automate the whole process. ’cause if I have to go buy the AV from, I’m gonna say the D word, the bad word, the dealer, and then I have to go deal with the rigamarole of dealing with insurance. If it’s commercial insurance is horrible. Trying to get auto insurance is horrible, especially in the state of Florida. You wanna talk about one of the worst experiences. This site, this site, and the prices vary. I want it all automated. Can coop build a product that automates this entire process and let’s call it you deliver a AV service on a platter in a bundle.

Sergey Litvinenko: Well, theoretically we can, we’ll, we’ll become a different company, of course, if we were to do this, uh, that goes way beyond insurance. But I gotta tell you, you know, putting together a, a tool where you can have your fleet operations, your financing, your insurance, it’s all doable. The thing is, if those components are not, are not figured out, then there is nothing to, there is nothing to combine. So meaning that, , I, I think out of all of those things, insurance is, is, is, is the biggest, is the biggest problem. I can sell you the bundle or the combined tool. , if I, I, I don’t have the insurance product. Underline it. , and so we’ll come back to square one. Is that okay? There is no insurance program. They can support an autonomous if you apply autonomous vehicle fleet operation today. So unfortunately we’re back to potty pooper.

Grayson Brulte: No, we’re not going back to party. We’re gonna party animal here. We’re not, we’re not gonna go hangover style, but we’re gonna go, we’re gonna stay on the party animal here, because if you think about this, an autonomous vehicle will give you an immense amount of data. If you bundle the fleet partner, you’ll know the tires rotate the the seat belts work that the, the treads are there. You’ll get all that data. To me, if you put that into your actuary miles, that will help lower your risk. ’cause you’re getting all the data to know that the vehicles are at tip top shape. But can you automate that? 

Sergey Litvinenko: Yeah, definitely. I mean, automating is not a problem. You can, , the data that gets generated by the vehicle, you can develop a pipeline of the data. You can feed directly into the actuarial model. You can develop beautiful dashboards that’ll tell you like real time status of your vehicles and. And the risk profile and all of that, , you know, that’s, that’s all doable. The challenge is when I say that the insurance product has to exist, we have to take that. Go to the, , state departments of insurance and license that product, because don’t forget, insurance in the, in the US is at the state level. There are 50, departments of insurance that you have to go through and they have to look at this product and they’re gonna be like, okay, we need to put a stamp of approval on it. And, , it could be a notoriously slow and. Burdensome process. So, but until that done, you will not be able to satisfy the local law, , state law, which says that you have to have a, an insur, uh, auto insurance policy for, , for a vehicle. And, , that is the most challenging part. So actually, the regulatory component is the most challenging part. I can tell you that we already have the product spec sitting ready to go. That’s the regulatory component part. That’s the most challenging. But once you pass that, and hopefully you pass that with, let’s say big state like California, and then other states just copy California, then it becomes, then it becomes easy. Then you have a product specifically designed for autonomous vehicle fleets. You can bundle it up. It’s gonna be great experience. Good to go. By the way, Tesla, Tesla might have an easier time with it because Tesla most likely will deploy, , Tesla insurance towards this. And, they’re already have a file product and I think they have a wiggle room where they can afford to take on full autonomous vehicles. But they do it in a fully integrated way through their MGA, which will give them an advantage for the rest of the world. We need to figure it out.

Grayson Brulte: The only disappointment to Tesla insurance, I can’t get it here in Florida. And as you know, you can’t get it all 50 days. ’cause as you clearly rightly said, it’s regulated state level. Let’s hypothetically say, so Koop rolls out this product in partner in Sherpa with an AV developer and a fleet management company. Could you just start with, say, Texas, California, and Florida, three of the largest markets for deployment of avs. And then gradually build that product out as the AV fleece scale since on day one, let’s call a spade a spade. They’re not gonna be in all 50 states.

Sergey Litvinenko: Yeah. Yeah. It has to be state by state and whichever partner, we end up working with this product. Uh. It’s gonna be an insane amount of effort to roll it out in all 50 states. And it’s not needed, you know, you have to follow the AV expansion. So if, if we have, let’s say, if we know what our, what the top states are going to be in the next three to five years. There’s definitely, that’s California, that’s Texas, that’s Florida, that’s Arizona, maybe Nevada. I dunno, maybe Pennsylvania, Georgia or those states, you just get this thing licensed there and uh, you go from there. So yeah, it’s, it’s, you know, the rollout can be staged for sure.

Grayson Brulte: Could one of those potential partners be the car rental companies? I say it’s ’cause they have experience in fleet management. They have experience in vehicle financing, they’ve experienced. In insurance. I’ve learned more about what happens when you have bad substances in a vehicle from the rental car industry than I’ve learned about anything else that they really, truly understand this. Could we, but I mean, I’ll, I’ll say this because there, there’s precedent here. Avis had the original deal with Waymo for Phoenix Enterprise Mobility. Thanks for listening, by the way. Thanks for being subscriber to the newsletter. I’ll, I’ll highlight that there. They were investors in partner with Voyage back in the day. Hertz was doing deals. Could we see them potentially reemerge and if they do. Could you be their partner? 

Sergey Litvinenko: the answer, the short answer, is absolutely . think it makes a perfect partnership also, big players like Hertz and Avis, they have, they not only have the expertise, they also have the real estate. So they already have the, vehicle hubs developed. , there is an ability for a vehicle to come in to go out, and there is everything in between, and they already have the apps that they can leverage. And, , if you just, figure out how to integrate the autonomous vehicles in there and maybe develop a special team for this, , you know. Sounds like something they at least should be thinking about today. Maybe already somebody’s working on this, but I would be shocked if a company like Hertz or Avis did not make move in autonomous vehicle fleet management space. I’ll be shocked. It’s like such a low hanging fruit, such an obvious thing. We’ll see. Maybe the new entrance will beat them to it . and then the Hertz will acquire the new entrance. \ but yeah. Partnering with a fleet on figuring out a very painful insurance problem. Sounds logical.

Grayson Brulte: Look at the real estate that the rental car companies have. They have prime real estate next to the airport, and as we know from the Uber and Lyft data, and we look at Waymo demand data, it’s one of the most passenger rich areas to pick up and drop off. Or at airports, the, the fleet model is emerging. Sergey what are some of the biggest challenges outside of insurance that have to be overcome for this model? Can scale? 

Sergey Litvinenko: There are two definitely in my mind that’s financing and insurance, and I’ll say insurance is more painful than financing. Those are the ones that I am familiar with and those are the ones that,. Our company is trying to help with. , I can imagine like, one potential challenge that I foresee is okay. You know, it’s kind of, if you, if you follow the incentives, the incentive of the autonomous vehicle developer is gonna be making a lot of money from licensing their vehicles and, you know, generating software revenue, they’ll probably want to push as much responsibility onto the fleet as they can. So the fleet needs to be able to take on that responsibility. You know, it’s not just the keeping up with the hardware. Maybe it could also be, , doing software updates and, you know, updating the software might be tricky. You know, how often do you do it? , you have, do you have to check every single vehicle? What if there was an issue and stuff like that. So you have to become like a tech, tech enabled fleet manager. And I, I think. From the talent and staffing perspective, that could be an interesting challenge to, to solve. But nothing that’s impossible. That’s the out outside of financing and insurance. That’s probably the only thing I envision there, but I’m pretty sure a company, let’s say like Move, which is a pure play av, , fleet manager, , in the us I’m pretty sure they, they’re gonna figure it out.

Grayson Brulte: I’ll say this for the record, moves a very, very interesting company. They have. Uber is an investor. They’re gonna operate the Waymo fleet in Miami. They’re gonna operate it. In Phoenix, they can take that whole fleet management layer and scale it, and then you could potentially, their biggest competitor that could emerge is Flex Drive, which is held inside of Lyft and maybe you have a duopoly. Unless Uber says we don’t want to have a duopoly. And they go and then they’ve historically done, they go and seed a couple other companies. Do you see that fleet management layer becoming highly, highly competitive? I. Over the next decade and perhaps new companies emerging to challenge what move is building.

Sergey Litvinenko: Absolutely. Absolutely. Yes. And going back to what we discussed earlier, if we, if we think of the analogy, two airline manufacturers, three and a half thousand airline operators. Maybe top 10 or top 50 own most of the market, but you have 50 that compete with each other. Probably a similar thing will emerge. There is also gonna be competition, not in different parts of the world. So it could be a handful in the us, in Europe, in Middle East and Asia, and , they might not overlap, but you know, they’re definitely gonna compete with each other, , especially if fund decides to go global. So, we, we, we want to have multiple. Fleet operators out there, I think competition is great. , who’s gonna end up winning or owning most of the market share we yet to see? Is it gonna be the first entra like move or is it gonna be somebody who comes in later and provides like just an amazing product? After first movers go through trial and error. We get to see, , I guess the, the, the history will tell, but I’m a hundred percent sure we’re gonna have lots of competition in that space.

Grayson Brulte: Competition is great. Competition breeds innovation. Sergey, in your opinion, what is the future of autonomous vehicle fleets? 

Sergey Litvinenko: Future is bright. The future is autonomous. Allow that tagline. I think the autonomous vehicle fleets will become the primary vessel for commercializing autonomous vehicle service. It just makes so sense. It’s, it, it, it’s. I’m not gonna say it’s simple, but from the economic standpoint, it’s the best way you can do so. You don’t need to have too much capital concentrated with one company and you have the, , separation of responsibilities. That makes so much sense. There is a reason why it happens in commercial auto, in trucking, in airline, and probably in other places that I’m not familiar with, but this is the most economically viable model.

Grayson Brulte: Scalable. That’s the bottom line. Embracing the fleet model. For autonomy is scalable. The fleet model furthermore benefits Uber and Lyft ’cause they’re gonna get fragmentation and it’s gonna give Tesla a clear lane to take market share, which is gonna raise questions. Is Waymo going to have to pivot? As this all scales and fragmentation comes in the market, and no matter which way the market goes, you’re gonna have to insure it. And to our listeners and viewers, if you need great commercial insurance for robotics and autonomy. Call Sergey at Koop. As I said, they’re the best sponsor in the world to sponsor this week in the Autonomy Economy newsletter, so thank you. But outside of that, they write great insurance policies with really great prices, and it’s a great team of people. Sergei, as we look to wrap up today’s conversation, what would you like our listeners and viewers take away with them? 

Sergey Litvinenko: I really hope that people try an autonomous vehicle service, and when they do that, they make their experience public. Post on LinkedIn, post on X. I think the more of a network effect we can produce, the more of a mind space we can take and, , it’ll be, it’ll be really important for people to know that this is coming. And again, once you go autonomous, you don’t go back. You have to try it for yourself. And I hope more people are talking about this.

Grayson Brulte: We need more people to talk about it. I was out on a walk the other day, an older gentleman in his seventies, and we were talking about it. I’m not getting a navy. It’s dangerous. I, I, I see that it’s on the news. The news pushes propaganda about autonomy. That’s not real. It’s fake news. What you need to do, get in an Navy, experience it for yourself. And the Sergey said. Take a photo, take a video, put put it on X, put it on social media. Let the world know how great of an experience it is, because the future is bright. The future’s autonomous. The future is autonomous vehicle fleets. Sergei, as always, sir, thank you so much for coming on the road to autonomy.

Sergey Litvinenko: Thank you, Grayson.