Transcript: Is the Future of Autonomy, Licensing and Contract Manufacturing?

Ford and GM’s Next Move: Will They License Waymo’s Tech or Partner with Foxconn?

Executive Summary

Following Ford CEO Jim Farley’s strong endorsement of LIDAR and L4 licensing, speculation abounds about a potential partnership with Waymo. This episode of The Road to Autonomy explores whether Ford or GM might become vehicle manufacturers for Waymo, the burgeoning role of contract manufacturers like Foxconn,

Key Topics & Timestamps

[00:00] Jim Farley’s Comments on LIDAR and Waymo 

Ford’s CEO stated that any company wanting a licensing deal with Ford must use LIDAR. He also praised Waymo’s approach to autonomy, which has fueled speculation about a potential partnership.

[02:21] Who Will Ford License an L4 System From?

Based on Farley’s positive remarks, Waymo is the “easy guess” for a potential L4 licensing partner for Ford. Automakers could use their large financing divisions to own and lease vehicles to AV operators like Waymo.

[05:40] Could GM Partner with Waymo and Use the Origin?

The discussion explores a hypothetical scenario where GM, after shelving Cruise, might partner with its former rival Waymo. GM could potentially repurpose its Origin vehicle, which was designed for Cruise, to operate with the Waymo driver stack.

[08:45] The End-of-Life Secondary Market for AVs

At the end of an AV’s operational life, a significant business opportunity exists in salvaging high-value components. This includes recycling battery minerals and reselling sensors, a lucrative market demonstrated by salvage companies like Copart, which has a market cap of over $47 billion.

[15:20] Foxconn’s Ambitions as an Automotive Contract Manufacturer

Foxconn is positioning itself to be a “white label” contract manufacturer, building EVs for other companies. By acquiring plants in Ohio and Japan, they can absorb the capital costs that traditional automakers are now hesitant to spend amid uncertain EV demand.

[20:00] The State of the US Electric Vehicle Market

The US EV market is described as a “three-player game” between Hyundai/Kia, GM, and Tesla, as many other automakers are pulling back. While Ford’s EV sales were down in the second quarter, GM’s were significantly up, highlighting the challenging and shifting landscape.

[25:45] Why the Focus on Electric Pickups Over SUVs? 

Automakers rushed into the electric pickup market primarily to defend their most profitable segment against new competitors like Rivian and Tesla. However, sales have been slower than expected, suggesting that hybrid trucks or electric SUVs might have been a better initial strategy.

[29:45] The End of the $7,500 EV Tax Credit

With the $7,500 federal EV tax credit set to expire on September 30th, a “pull forward” in sales is anticipated. Consumers are expected to rush to buy or lease an EV in September to take advantage of the incentive before it disappears.

[32:30] Waymo’s Business Model: Licensing, Revenue, and a Potential IPO

The conversation considers whether Alphabet will have an “AWS moment” by breaking out Waymo’s revenue once it becomes substantial. However, a clear path to profitability is seen as more critical than just revenue for a potential IPO, due to the high costs associated with fleet management and technology.

[41:40] May Mobility’s Strategy and Launch with Lyft 

May Mobility, which began by operating fixed-route shuttles, is now preparing to launch a service with Lyft in Atlanta. The company is well-funded by strategic partners like NTT of Japan and Toyota, giving it a solid foundation for growth.

[46:00] What to Watch for in the Autonomy Sector 

Key developments to monitor include potential federal legislation that would provide regulatory clarity for AVs, new partnerships for Waymo, and increased activity in the autonomous trucking sector.

Watch the Full Episode of Autonomy Markets

Full Episode Transcript

Grayson Brulte: David, it’s always great to have you on the, the road to autonomy last week, a lot of interesting things happen. Jim Farley, CEO of Ford goes out there and says, LIDAR, you gotta use it. If you wanna do a licensing deal with Ford. What’s that all about?

David Welch: He also kinda spoke, uh, pretty highly of Waymo’s approach to autonomy in their vehicles. So, uh, a lot of people heard that and were speculating that, that maybe Waymo and Ford. Are intoxicated as they were when Mark Fields was CEO and they were supposed to have that announcement at CES many years ago. But, um, you know, I, I, there, there, there is a school of thought out there that, contrary to what Elon Musk has said about lidar, you need them because there are limitations of cameras, right. Um, in terms of, you know, weather, distance, they can see and. You know, I, I, I think if you talk to a lot of people out there in, in, on the tech side of autonomy, they’ll tell you that you kind of need a suite of all of this stuff in order to really make a safe vehicle that can avoid everything out there that, that a robotic driver needs to avoid. And, you know, in a perfect world, cameras would be like human eyes and you could make decisions based on that. But given the risk of, you know, what happens when a company’s. Self-driving vehicle gets in an accident or hits a pedestrian or something like that. Uh, I, I, I think for the foreseeable future, you’re gonna see cars that, uh, most of the players in the industry are gonna have lidar cameras, different sensors on their whole suite of things to make sure the car is behaving in a safe way. And I think that’s where Core is. And, and, you know, I don’t know that Ford is gonna go, full bore into Robax. I don’t think they’re certainly not gonna do it on their own, or they would’ve kept Argo. But, uh, do they design vehicles that have lidar that they’ve developed in conjunction with Waymo or some other players and, uh, they want their vehicles to be safe because they share some of the liability, even if it’s somebody else’s stack? Yeah. Um, I, I could see something like that. Look, I think Farley as Mary Barra does in other auto CE CEOs probably see the day when, uh, complete autonomy is a feature in the cars they sell. For personally owned vehicles. It’s, you know, like Ford s, blue Cruise, GM has Super Cruise. Other companies have have similar level two, level three sort of capabilities and, you know, does that advance to a full self-driving vehicle someday? I don’t know when, but I’m sure it will. And you know, they’re gonna want, they’re, they will go belt and suspenders because the traditional auto companies are extremely cautious when it comes to this stuff.

Grayson Brulte: At the same time Mr. Farley made those comments. He, he openly said that at the end of the day for. Gonna license an L four system. So if they do license it, who do you think that is? And then does Ford leverage their financing division to finance those vehicles?

David Welch: Look it it, based on what Farley said about Waymo, I mean, that’s the easy guess, right? He said they’ve got the right idea for doing this. And really, you know, you think about the US AB companies when it comes to, you know. Consumer driven or robot taxi type vehicles. I mean, Waymo’s out there, they’re, they’re by far in front on this thing. May Mobility is doing interesting stuff. Tesla’s getting started in Austin, but Waymo’s out there, is it six cities now? Um, that they’ve either announced or they’re already in and you haven’t heard about bad accidents or, or anything like that from them? Uh, even minor incidents in a while. You know, they, they, they seem to be doing pretty well with it. So, yeah, I, you know, I, I think that’s where Ford would go and look, there are a lot of things car companies could do if they want to be the vehicle producer for Waymo, they could own them and lease ’em to them. ’cause they all big finance companies, they, they can carry the cars on their balance sheet. Um, they could out and outsell them. And I don’t think Waymo wants to buy the cars. , So, you know, it’s sort of like. GM Financial was, you know, I, I think they’re, they were, the plan I think was to lease. I mean, they, they had a, a line of credit to cruise as it is, but I think they were going to lease the vehicles to them as well, the origins and, and other vehicles they had.

Grayson Brulte: That raises the question. So your colleagues reported that move is gonna raise 1.2 billion US dollars to buy Waymo vehicles. Hold ’em on the move balance sheet. They’re gonna raise that as debt. And if I’m Ford, I said, well, there’s an OP or GM for the matter. Okay, there’s an opportunity for us. We have the. The credit we, we have the, the platforms. If they did follow a similar route to move and became a contract manufacturer for Waymo, what platform do you think either GM or Ford would use?

David Welch: You know, gm, I mean, they could continue to use the bolts and we, we saw some reporting over the weekend that a few of them are out there driving around. I, I think they said they were testing both super crew and some other stuff. They could possibly use that. They could use any of the EVs they’ve got. Right. And they’ve got a big family of them now. I mean, GM is selling a dozen different electric models, uh, pickup trucks, large SUVs, mid-size SUVs. They could be Chevy Blazer, EVs, they could be Cadillacs if you want the luxury experience. They, they’ve got a lot of things you could use. They still have the origin. You know, they, they, they shelved that when they shelved cruise, but the vehicle still exists and they were proving it out. They don’t have the exemption from NHTSA to run the vehicle without. , All, you know, the, the, the human controls, but you know, the, the, they can, especially now that you’ve got Sean Duffy, uh, working on ways to do that, GM could go for that exemption and, and, and lease these out to somebody or sell ’em.

Grayson Brulte: You’re right, CEL. That’s the part five. That’s the part five. Five, five exception. And that gets really interesting. I mean, hell could freeze up before this happens, but do you ever see a scenario where GM gets into bed with Waymo potentially, and Waymo ends up operating the origins with the Waymo stack.

David Welch: Yeah, I’ve thought about this. I’ve thought about this. I mean, it would be the ultimate kind of like, you know. Declaring a truce in working with your old enemy. Uh, and there were some pretty bitter fights in California and other places about who was gonna get licensed and that, that kind of thing. Um, but you know, I, I can see it happening now. GM says they’re, you know, Mary Barr has said they’re still working on their internal program to develop a personally owned self-driving vehicle. And GM has always seen that as the holy Grail, but. At some point, do they look at this and say, you know, Waymo’s out there running Robotaxis in multiple cities, so they’ve got a neural network established and they’ve got a lot more miles of testing and, and they just have the better mouse trap on this thing, and they’re further ahead, develop it and just decide to go with them. , I, I’d say it’s very possible. I, I haven’t heard that they’re, you know, they’re talking about this either side, but why not? If you no longer have crews, you’re no longer competing with them, in, in a direct way like that. Yeah, I can see that happening. Ford too. I mean, Ford’s got electric vehicles. The cars don’t need to be electric. I just think it, it helps to have, more electricity on board for computing power. And, you know, I I I, I, I, I wouldn’t see it being a lightning per se, but, you know, does Ford come out with a three row SUV? , Is it, uh, a maki. You know, they, they, they’ve got possibilities too.

Grayson Brulte: here’s the possibility. If you, if, if hypothetically, then Waymo has to deal with Toyota, gm, Ford, and Hyundai. If that was to happen, it would say one thing to investors that Waymo clearly doesn’t want to operate the fleet, they wanna go into the licensing business. And then in my opinion, the gm, the Ford investors would sheer over remarkably, okay, we’ve got a path to a proven technology. It seems like it could be a potential win-win for both sides.

David Welch: GM shareholders did not like when they spend money on cruise, but if their, if their strategy would be to make the cars and then get more business, get, you know, some of the revenue, , from Waymo in a, in a, some kind of joint deal. Uh, I think, yeah, I think investors would like that quite a bit. And it makes a lot of sense for gm whether they wanna do it. Are they ready to throw in the towel on their, their own developed, vehicle? I don’t know, but you know, they lost a lot of people when they shut crews down. So it’s, it’s unclear who’s still there developing this technology. So yeah, if you can’t beat ’em, join ’em,

Grayson Brulte: You’re right. They lost a lot of respect in the market too from from an engineering perspective. So here’s a hypothetical. Let’s say that Waymo does the licensing deal with gm. GM’s gonna manufacture the next generation of the Waymo vehicles. They’re gonna hold ’em on their balance sheet on GM Financial. What happens at the end of the life of that? Waymo vehicle is there, oh, is there a secondary market if you strip off all the tech, or where does that vehicle go? At the end of its life?

David Welch: You know, there’s a lot of kind of questioning out there. What you do with, with, let’s assume it’s an electric vehicle. It’s out there and GM has invested in one where they recycle the batteries. Uh, JB Straw bell, the battery guy, the battery genius behind Tesla. He, he’s got a company that does that. So yeah, I think they would, I guess, strip off the sensors and that sort of thing. I mean, this would be like a high end kind of, Salvage company, right? You’re taking battery, battery cells, battery. You could sell those, uh, the, the platforms or the cells for stationary storage or you could recycle the minerals and stuff in the, in the batteries. A lot of things that they can do that and, and, you know, different players are toying with with what you do with that. But yeah, I mean, look, there’s, um, yeah, there’s a company, and I’m drawing a blank on the name of it, publicly traded company that’s worth about $50 billion that, uh. Basically is a junk yard and uh, geez, I wish I could remember the name of it. Oh, Copart, that’s the name of it. in fact, while we’re sitting here, I’ll tell you what it’s worth because it’s got a huge market cap. Copart Inc. It’s market cap and it’s a junk yard. They do salvage work. It’s $47 billion.

Grayson Brulte: What a junkyard 47. So what’s the PE on this? Is it astronomically high PE or a low pe?

David Welch: 32.

Grayson Brulte: It’s not bad.

David Welch: No, it’s not. I mean, and, and you know, they’re basically a salvage yard company. They salvage vehicles. They sell ’em, they, you know, they that are sold to the licensees, dismantler, and rebuilds. They sell the parts. Uh, you know, it’s a pretty good business out there. And, uh, you know, do they get into that business? Because, you know, if they get the expertise to handle batteries and all the sensors and this sort of thing, you know, or somebody like that, um, there’s, there’s a way to deal with this. You know, one thing about the origin, as GM had designed it, these things were supposed to go for like a million miles. They were very simple vehicles, easy to clean, kind of no frills. And, um, you know, if the vehicles are designed for, for some sort of easy, you know, reclamation, yeah. There, there’s a business out there where someone can handle that.

Grayson Brulte: There’s a lot of business time that nobody talks about the depot level and the salvage level, so. There’s been a lot of controversy around the origin and Zoox is facing it that you face each other could. How hard do you think it’d be for GM to make it where everybody could face forward from an interior? Could they just basically put a new interior in there and keep the shell?

David Welch: having everyone face forward, you mean in the car? That should not be hard. I mean, I mean, were you ever in the origin?

Grayson Brulte: Yes.

David Welch: this is a step in shuttle, right? , You know, rearranging the seats is probably one of the easier things you’d have to do. It, it, it’s, it’s, you know, the, the, the tech magic to that was that they had, you know, pretty, in a pretty efficient way, I think kind of embedded all the sensors, lidar and everything like that. The EV battery was the floor of it. And so you had a lot of interior space there. Which way you face the seats, I think it is, is. Probably the easiest part of the problem. , I would think the tougher part would be, say you’re gonna go work with Waymo on this thing. You know, this, this vehicle had been designed with its suite of sensors and everything to work with cruise system. How much they would have to do to accommodate Waymo’s system. I don’t know. But it’s, it’s a very interesting idea. And, you know, you’re talking about manufacturing at that point, and, and it, it doesn’t, it strikes me as something that’s pretty doable.

Grayson Brulte: Is the plant that GM retooled for the origin, is that still around? It might have. On table, is it still around or has it been completely retooled for something else?

David Welch: No, they, so it’s, it was made in the Detroit Hamtramck plant, which, so that’s where they make their, that’s where they make the Hummer Ev and their electric pickup trucks. So, you know, when GM kicked off the whole EV plan, the $35 billion gamble on this thing, they thought that pickup trucks. Electric pickup trucks would be pretty red hot. And everybody was rushing RIV and Tesla Ford was rushing to get into that and they don’t sell that well. So GM had the second plant in Lake Orion, Michigan. It’s out, you know, kind of northwest suburb of Detroit was, uh, that was gonna be a second EV pickup plant. They’re now, they will be able to make ev pickups there if they need them, but they’re gonna make regular pickups and they’re gonna make, uh, gasoline powered SUVs. You know, Tahoe. Size stuff. , So to answer your question, you know that Hamtramck plant making hummers and pickup trucks, you know, the sales numbers are getting better, but they’re not huge. So they can certainly make a decent number of origins there. That would not be a problem.

Grayson Brulte: And if I’m an alphabet, it gives me a very made in America, very pro-Trump off ramp from the Chinese made Zeekrs. I say, look sir, we heard you we’re abandoning that program. We’re moving to an American made thing, and you would get a Mary Ms. Barra would get a very loving truth post to saying how great of an executive she is.

David Welch: The politics are very heavy these days, right. I mean, look, you know, when GM announced that $4 billion, some of it was moving vehicles from Mexico to the us they’re gonna build here now. And so that got them a lot of points. Some of it was just adding production for vehicles that sell particularly well, like their trucks and SUVs. Uh, but yeah, Trump was all over it. And you know, I, I think gm, you know, they’ve got people in Washington who talk directly to Trump and talk directly to the administration and they, you know, they wouldn’t have spent $4 billion or announced 4 billion. Without knowing that these tariffs are gonna be here to stay and that there is some potential reward here by playing along with Trump’s main America mission. So, you know, what, what does GM hope to get out of this? Is it, you know, some help on tariffs, um, more than what’s already been announced? Is it something to do with EVs down the line? , Is it, is that what kept the manufacturing credits for electric vehicles, uh, from being cut? In the re uh, in reconciliation. ’cause the consumer credits are going away, but not, not the manufacturing credits. So that’s, you know, who knows it, it could be TBD, but, uh, GM has played along with them pretty nicely. And, and this was, this was a big announcement for the Trump administration to be able to say they got GM to bring back, uh, three or 4,000 jobs. I think I’d have to go back and look at my story, but It’s, it’s not a small number of workers.

Grayson Brulte: it’s a healthy amount. Let’s not forget, Sterling Anderson’s now chief Product Officer at gm. The gentleman’s got autonomy chops.

David Welch: He does. Uh, I think, I mean, he’s the total product guy. I think he’s more there for his experience at Tesla, you know, in terms of making electric vehicle programs. And he is young and, and so, you know, if you’re talking, if you’re GM and you’re looking at vehicles that are. long term, however long it takes electric and you’re looking at vehicles that, you know, are gonna have at least level two, if not more autonomy. And you’ve got someone who’s worked with two companies who do that. Uh, it, you know, this was, this really was a, a kind of a future move by the company. He’s only 41 too, I believe. That’s, that’s the age I had when we wrote the story anyways, so, uh, you know the that, that move has got a lot of potential.

The Rise of the Contract Manufacturer: Foxconn’s Automotive Play

Grayson Brulte: And there’s a lot of potential, a lot of upside. The other move that’s really catching my attention is Foxconn and their ambitions of moving into automotive. They could, the way the Foxconn’s playing their cars, they could end up becoming the contract manufacturer for everybody. Waymo, for Nuro, for for Wayve. What are your thoughts on Foxcon entering the automotive sector?

David Welch: You know, they’ve been flirting on this for so long. Uh, you know, they’ve got that pla that, that sort of white label EV platform so they can make EVs for others. They’ve got a huge plan in Lordstown that’s not making very much, if anything, uh, and clearly and they spend real money on that plan. Clearly the desire is there. Is the market there for them in the us? That’s gonna take a while, but there’s a market for them in, in other parts of the world. I think. And you know, I, I think, you know, that’s the Japan deal. They, they’re, and, you know, I still think they can contract manufacture for other car companies. And, um, the timing’s interesting in the sense that all the car companies are pulling back. A lot of EV models and a lot of production capacity for EVs. They don’t wanna spend money on new models and plants and equipment at a time when demand is uncertain. And their regulatory environment has shifted radically in the US. So, and the, and the tariff environment with the US and other countries is now in a lot of flux too. So you have a contract manufacturer like Foxconn who wants to do this, they wanna spend the capital, why not? So, and I think that’s what Foxconn is seeing. And they’ve got the money to kind of build a plant and sit on it for a while. Uh, I think in the worst time they might be sitting on it for a long while. But, um, that, you know, I, I, I think the desire, they see this as a long term bet and they’re willing to kind of handle the rough ride for a while while they’re doing it. I don’t see them coming to Detroit though, because they’ve already got a plant in Ohio just three hours away. That’s not doing much.

Grayson Brulte: So it was reported over the weekend that Nissan’s Oma plant in Japan is being taken over by Foxconn. To avoid a shutdown, that plant produces 240,000 vehicles. that’s, a Nissan plant.

David Welch: Yeah, that’s, well, that’s how I meant by the Japan deal. , Yeah, they’ve gotta see a deal and, you know, they’ve gotta see production or, or a market in Asia where they can, uh, they can do this. I mean, think about. Are they going to make EVs for a bunch of Japanese manufacturers now? So instead of each of one of them having to dedicate a plan to EVs, they can manufacture for them. You know, that was their plan in Lordstown, Ohio was to make EVs that, let’s face it, or you know, even GMs better selling EVs are still kind of selling in what we would traditionally call niche volumes in, in the us. So if you can do, you know. Eight, four, whatever it is, niche vehicles for a variety of car companies. That’s a good business for someone like Foxcon. Magna has done this for years, for other, for, for car companies. You know, they, they do it in Austria, uh, for the Germans, and, and they could do that in Japan and they could do it in Lordstown too. If, if the vehicles, if the demand is there.

Grayson Brulte: This is a hypo hypothetical, but Wave has a very public relationship. With Nissan, could Foxcon be that manufacturer for those avs that will be EVs, and then put those on the Uber platform because Wave has announced that they’re going on the Uber platform in London. We don’t know an OEM partner. We don’t know a manufacturer. We don’t know a financing partner, but just kind of reading between the lines here, Foxcon seems like they could be in a pole position for that. ’cause the fact that they’re getting a plant.

David Welch: Yeah, it could be. I mean, you know, you and I are speculating here, but if you need production capacity and everyone else is pulling back, uh, here you’ve got Foxcon with two plants now, or they will have a second plant and, and one in Asia, one in the us. , You know, and, and, and look, that alleviates a headache for wave ’cause they don’t wanna spend money manufacturing this stuff. None of the AV companies do, and none of the none of the operators do either. They want someone else to own the vehicles and build them, and so it sets up a lot of possibilities.

Grayson Brulte: Hypothetical. Let’s say we see an announcement wave. Foxconn, Waymo. Foxconn. How does, how does Ford and GM react to that news? Let’s say it’s at the Foxconn plant in Ohio. How, how, how will those two big Detroit titans react to that news?

David Welch: react in, in what way? I mean, I, I, like, I’m not sure that they have to Right. You know, they, they’ve, for. Plenty of issues they needed to deal with on their own. But, um, you know, Foxconn has been, uh, kind of, you know, there ready to make something for anybody for a long time. And that, that somebody, whether it was gonna be Lords Town Motors or Fisker, you know, they were potentially a threat to Geo and Ford in the EV market. I don’t think they’re that worried about that anymore. Um, you know, you look, look at the EV market and you look at second quarter EV sales. Tesla was down. Uh, Hyundai is a strong player. Ford ev. Sales were way down. GMs were way up. Ford’s delayed some EV programs. They do have the, uh, the pickup truck, uh, that they’re the small affordable truck they’re developing. But, you know, you look at, you know, in the US market, I think at the moment, it’s basically a three player game or series about EVs. It’s Hyundai, ikea, let’s call it, you know, the Korean manufacturing, uh, combine. GM and Tesla. I mean, Ford’s still there, but they pulled back Toyota. They’re there, but they’re kind of slow walking in this thing. Uh, Honda’s got two vehicles. They’re, they’re, I think, discounting them. You know, nobody else is really doing big volumes of EVs in the us. Mean, this was, you know, story I did on gm. You know, they, they know it’s gonna be a challenging market. Going forward, and they’ve got a massive bet on this thing. It’s, it’s, it’s, you know, a $35 billion bet for, for a troubled market. But, you know, the, the, the silver lining to that is everyone else is backing away. They’ve got an open look at getting those buyers.

Grayson Brulte: Look at that. So Hyundai Kia, they have motional. We, we know there’s a new CEO Motional, but outside of that we don’t know much. GM has Super Cruise, but no L four program and Tesla’s got FSD. It just seems that if GM wants to really compete and gain market share to go for their goal of personally owned, which Ms. Barra has stated publicly, many, many times, they’re gonna need a partner. If they do get that partner, regardless of who it is, does that then force Ford’s hands say, okay, we gotta make better EVs, and oh by the way, we need, we need to get an L four partner sooner rather than later.

David Welch: Yeah, and, and the way Farley’s talked about it, I, I, I think they’re gonna be looking for, or they’re probably already looking for a partner. GM’s a bigger question mark there because they still have this internal project. Um, we don’t, you know, they haven’t really given us a clear idea on where that is, um, and, and how hard they’re pushing. It’s, you know, it’s not something they call out in their financials anymore like they did with Cruise. So, , I’m, I’m a little skeptical of it just because they lost a lot of talent when they got rid of Cru And it’s, you know, you look at GM’s capital allocation strategy, you know, they’re spending money on their product, um, and investing in capacity in, in the product lines that are growing for them. And then they will buy back shares and pay dividends. It’s, you know, it’s a very clear, uh, clearly articulated capital allocation strategy. It doesn’t say too much about autonomy. Now they could, you know, they could be putting it in their r and d budget, that’s fine. But at the moment it doesn’t look like something that they’re, they really see as a big part of their business.

Grayson Brulte: My opinion, they’re going to have to see the big part of the business ’cause it’s gonna be huge and tremendous at some point. Then you have on the EV front, you have slate. So now the tax credits are going away. We’re probably looking with sub 30,000 on that vehicle, maybe 35,000 for that pickup truck.

David Welch: Yeah.

Grayson Brulte: How is that gonna ramp up manufacturing capacity to meet demand for that if they can hit the price targets that they publicly put out there?

David Welch: You know, I’m, I’m skeptical on the pickup truck part of this. . Now, maybe a small, cheap one will do well, but geez, cyber truck doesn’t sell. Obviously it’s got stylistic issues with a lot of consumers, so it’s not moving ’cause it’s pretty quirky. The rivian pickup, that’s a mid-size truck. It doesn’t sell the lightning sales. Were way down in the second quarter. Gee, I’m selling pickup, electric pickup trucks in small amounts. You know, GM’s, bestselling EV is the Equinox, which sells for 35,000. Pre-ex or, or yeah, pre-tax credit. So, that’s a small, affordable, pretty roomy SUV, it’s electric 320 miles a range for the cheapest version of it. That’s a pretty attractive package even compared to ice vehicles because there aren’t that many vehicles down in that price range anymore. The average vehicle sells for 48,000. So I, you know, I think the slate could find buyers just because it’s a cheap vehicle. But I still think electric pickup trucks to the degree that people are gonna use them for work. That’s just a tougher sell. They do lose range. You lose range on your gasoline pickup truck too. I think you lose more, you lose range quicker when you’re hauling a lot of stuff around in a pickup truck if it’s electric than, than with gas. That’s a kinda what I’ve heard anecdotally. But I think there’s, even if it was the same, there’s a perception out there that if you gotta stop and charge as opposed to just stopping at a filling station, it’s just not a good solution for your work truck. And, uh, look, I, you know, I had a 10-year-old Ford Ranger pickup with a manual transmission and hand cranked windows that I sold for a thousand dollars in 2002 when I bought my first mini. And, um, you know, some guy down in, in Mexican Village, which is the, the Mexican neighborhood of Detroit who had a lawn mowing and landscaping business because my truck had a trailer hitch on it. He bought it to put a little trailer and haul lawnmowers around, right. , And, you know, he can fill that tank up and drive 400 miles or 300 miles, whatever it was. Um, you know that, that’s just better than a small electric pickup is gonna do. And he doesn’t have to worry about finding a charger. You can go anywhere for it for his crew. So there, there’s a market for small trucks. I’m just not sure it’s electric. And so, you know, slate could prove me wrong. It’s a neat little truck. I mean, it, it, it, you know, in terms of how they’re manufacturing it, but, uh, I don’t know. So far, the pickup trucks aren’t moving.

Navigating the EV Market: Pickups, Tax Credits, and Tesla’s Future

Grayson Brulte: Why the focus on pickup truck? And not SUVs where we have decades of sales data that they sell and the American consumer loves ’em. Just look at, it was highly criticized. GM’s Electric Hummer, you and I have both driven it. It’s fun as heck to drive and it’s actually selling. Why not more focus on SUVs.

David Welch: Well, I, GM doesn’t split out, I don’t think, uh, the Hummer sales, whether it’s pickup, SUV, ’cause there is an SUV version and I’ve seen more and more of those on the roads. And so I I think if you, my guess is if you split those sales out, they would be selling more of the SUV than the pickup truck. Look, I think this all started a few years ago when. Rivian was, their first vehicle was the electric pickup. Everybody was in a race to get the first electric pickup truck. It was the most American of vehicles. They sell, you know, in, in huge numbers and you make a lot of money off them. All the companies, they have great margins on their pickup trucks and nobody want, nobody wanted to be left standing when there was, you know, before we knew what the cyber truck was. There was word, well, boy, Tesla’s gonna enter the pickup truck market. Rivian coming into the pickup truck market. I think Ford GM said, we can’t, we can’t wet our lifeblood go electric while we’re standing here, which is a logical response. And so everybody poured money and resources into the pickup market. And you know, it’s early days and, and if you really think about the EV market, it’s still pretty early. You know, if, if, you know, if you put this on a long timeline. , I mean, you know, you and I have been talking about EVs for, you know, seven, eight years, but there still aren’t that many choices on the market compared to internal combustion vehicles. And um, and there’re at what, seven, 8% of the market right now. There, there’s room to grow with or without incentives from the government. So I, but I, I, I, I, it, it’s a longer, slower burn to get to big numbers with electric pickup trucks, but that’s why everyone got into it, right? I mean, they, they saw this huge market for internal combustion vehicles. If electric drives the way to go, then you have to play there. And it turns out that’s when they probably could have waited.

Grayson Brulte: What if they went. It’s a hybrid instead of Ford doing the lightning. What if they did a hybrid? Then will be we having a different conversation right now.

David Welch: Yeah. And look, there are hybrid trucks out there. I, I, and, and, and plans to do them. , In a lot of ways it is better ’cause you get really great driving range out of a hybrid, which is ideal for a fleet use. Right. Also, a lot of these hybrids also have power systems with, you know, outlets you can plug into the back, the bed of the truck, which is great for craftsmen and, and tradesmen who, you know, they want to power a SAR or other tools outta that thing. They can do it. So yeah, they’re, they’re like, there’s great logic there. And, um, you know, I, I think you’re gonna see, uh, a lot of the players in the pickup market go there. And, and we’ve seen ’em in the past. I mean, GM had a, a hybrid pickup truck years ago. I mean, it was a, it was a mild hybrid, but that was one of the things they bragged about is you could plug stuff into the bed. And, uh, you know, I, I, I think that’s where kind of the market will go in the interim. I mean, the Maverick, that’s a hybrid truck by the way.

Grayson Brulte: is a good looking one. The market’s gonna go there, so September 30th. The $7,500 tax credit goes away. Do we see a pull forward, do you think, in the month of September in terms of EV sales, where people want to get ahead of that?

David Welch: Yeah, I think, we’ll, because look, we saw pull forward late last year when there were rumors that Trump was gonna come in and get rid of the tax credit, and now if he didn’t get inaugurated. Until January, but we still saw some pull forward action in the fourth quarter. And then, you know, it died, died down a bit. And I think now that the bill has passed, and once that gets out there, you’ll see the same kind of pull forward that you saw people trying to be tariffs, by buying in April and May. And I, I, I think even a little bit into June. So, yeah, I, I, I think anyone who wants an ev uh, is going to try to get out there and, and lease or buy while, while that money’s good. It’s not a bad idea. 7,500 bucks from the government, plus whatever other incentives, you know, are out there on a state level and everything. You, you, you know, we, we got a big discount when we leased one, so, you know, there’s, there’s, there’s other money available for these vehicles, but, uh, I think people are gonna race to get it between now and the end of

Grayson Brulte: So October 1st rolls around, Tesla’s carb credits are gone. $7,500 EV tax credit gone. You have Robo Taxii, but it’s minuscule revenue. Optimus is not ready to be commercialized. W where does Tesla go as a company? I’m asking that from a, from a pure revenue sales perspective to fund all of the ambitions that they’re working on with with autonomy and robotics.

David Welch: Tesla has money and they also have a great ability to raise it still, even though the stock is down. And what, what investors, the reason it still has the value, even though the, the shares have been down largely because of Elon’s political stuff, I think. But, you know, and, and, and, and the sales issues that his political stance caused. But. You know, the, the, and the shares have jumped around, right? It’s been, you know, fairly volatile. It gets a bump whenever there’s positive news on robotaxi and AI related stuff. You don’t value a company, , at, at the value Tesla has today to build cars. It, it just, you know, it’s not that profitable of a business. So there’s still a bet out there that it’s a technology play with growth. And, and so I, you know. , If, if Elon goes out there in a big way and says that, you know, they needed to, you know, float some new issues, and again, they’ve got money to do this, uh, as it is, but if they needed to and it was for AI autonomy, I think he’d find people to buy those, those issues. He’d be able to raise them.

Waymo’s Endgame: The Path to Profitability and a National Framework

Grayson Brulte: Fully agree with that. robotaxi, it’s a very constraint environment where it’s operating now from 6:00 AM to, I believe it’s 9:00 PM central time. Let’s fast forward. I’ll be general. Let’s fast forward four quarters from now, five quarters, maybe six quarters. The ODD is dramatically spanned. It’s on, it’s on both sides of Lady Bird Lake and in downtown Austin also, where Terry Blacks is really great barbecue and let’s say perhaps by then they’re in another city, which I do not believe will be California, be another part of Texas or Florida, and they then they decide to break out robotaxi revenue. You and I both know it’s gonna be minuscule, but. What happens then from a market perspective? Does that force alphabet to break out their revenue and say, oh yeah, by the way, we’re the Mac daddy on this revenue? Do we start getting into a revenue breakout cycle then?

David Welch: I don’t see Waymo really feeling that kind of pressure. I, I, you know, there’s been plenty out there on, on an eventual IPOI think when you start to see Waymo break out financials, I. , Separate of, you know, the rest of the Alphabet Inc. Empire, that’s when we’re starting to get closer to some sort of IPO for them. In Tesla’s case, you know, Elon Musk might want to do it to show that they’re, they’re making headway with autonomy. By the way, while we’re sitting here, I looked up and at the end of the first quarter test side hosted 40 billion in cash. Uh, so that they, they’ve got the money to fund stuff, , like, like this. And, you know, look, right now. This is a small test batch in a relatively small part of Austin. You know, they can expand it. Sure. But, um, and what, what did he say about safety? Uh, they were gonna be maniacal about safety. I forget which, uh, superlative he used, but it’s something out there about how crazy they were gonna be about safety. And, um, I, you know, they have to, so I, you know, they could be, you know, on on a on a pretty slow rollout. If he’s gonna come through with, with what he said.

Grayson Brulte: I’ll be in robotaxi I’ll been in there. Tens of times by the time this episode’s been released. And on a followup episode, I’ll, I’ll let you know really what my thoughts there. And when you look at Alphabet breaking out revenue, there’s, if you look back in history, there’s a moment, I’ll never forget the first time Amazon broke out AWS revenue. People said, holy shit, this is bigger than. We could have ever imagined. Do you think that’s the moment where, where, where the Waymo revenue gets so large, it’s they have their AWS moment. ’cause I remember when they, when Amazon broke out AWS for the first time that sh stock shot up, I’ll say 11, 12%. ’cause investors’ like wow. Is, is basically, you think alphabet’s gonna hold the cannon back until it gets so so large that it kind of knocks everybody’s socks off and they have their AWS moment.

David Welch: Could be, you know, look with, with Rob and it could take a long time here to, to the, the other part’s, not just revenue, but profitability. Right. Running an AV company is very expensive and you have a lot of smart people you need to employ if they have a fleet of cars. All the stuff we’ve been talking about today and, and other times on the podcast, so it’s not just big revenue, but is there a path to good profitability? I mean, that’s the question I’ve had for robotaxi companies all along. I mean, you’re managing the network, which isn’t cheap. You have a lot of talent. You need to hire, you need to manage the, the vehicles themselves. . And all of that is, you know, the vehicles themselves are pretty expensive, right? Because you’ve got these suites of sensors and all that. Remember the, the story that I had on Herson Business Week about how much it cost just to repair some of the sensors on the autopilot Teslas that they had bought. Um, you’re talking thousands of dollars. So every time there’s a fender bender or something like that, even if, even if it’s not a Waymo car’s fault. You know, those things are expensive to repair, so like the fleet management side of that business is very pricey. So I think in, in Waymo’s case, what I’d be looking for, isn’t it just, not just like one measure of revenue or, or anything like that, but where do they feel they’ve got the scale they need to make that business? You know, put it on a, on, on a pretty clear path to profitability. I don’t know where that is, but I think that’s when you start to see some, some more. Clear communication about how it’s doing financially, and then maybe some talk about an IPO.

Grayson Brulte: you think the end goal is for Alphabet to to spin out an IPO email at the end of the day?

David Welch: I’m less convinced of that now than I was, but you know, there’ve been some numbers floated out there about what it could be worth if they were to IPO it today. And, um, it’s, it would, it would have some pretty good potential value. But I, you know, look, you know, I’ve talked about this. Th there there is more interest in autonomy in the past, let’s call it nine months than we’ve seen for the past few years. There’s more money flowing into it, you know, wave got funded. who else Main mobility has raised around, uh, some of the trucking companies we’ve talked about have raised funds, so there’s money going back into it, but is there enough real enthusiasm right now to do an IPO? I, I, I think Waymo could IPO and they wouldn’t have a problem with it, but it’s the timing optimal. Uh, that, that, that’s a little tougher. Uh, and by the way, what’s the regulatory landscape? I mean, we, we still have to see what the Trump administration is going to do with allowing vehicles that don’t have controls on the road, and that kind of thing. So, you know, I remember being at, um, one of the autonomy conferences two years ago. One of the, uh, uh, it was someone from Franklin Templeton said on a panel, the sector’s not really investible until you have a very clear look at the regulatory landscape for self-driving vehicles. And it’s getting clearer, but we’re still not there. So a lot of, you know, There, there are a lot of balls in the air on this still,

Grayson Brulte: There, there’s still no national framework, and you have the midterms looking around the corner

David Welch: Sure they’re working on it. I mean, Duffy’s been pretty vocal and people in Congress have bills out there. So the, it’s, it’s, it’s in the works. It’s also, we’ve also seen that before and we didn’t get anything. I think this time we will because the, the Republicans weren’t the ones blocking it, and they’re the ones pushing it now. And they, they they can, if, if they want to get this done by midterms, they can do it.

Grayson Brulte: One of the biggest historical hiccups has been one of your senators, Senator Peters of Michigan because Senator Thune wanted to include trucks and Senator Peters never wanted to include trucks in the compromise. Remove trucks, is that gonna be a, a hurdle this time? We don’t know, but we do know from an investor standpoint, they want a, a national frame regulatory certanity If we have the precedent signs, a national framework for avs and all 50 states and inculdes trucks and cars, then I could see a lot clearer path for alphabet to unlock value. But then the other side of me says the biggest value unlock, which I know they, they would never do, but I’ll just put it out there. If they spun out YouTube, you’re, and they get Netflix like multiples. That’s a $500 billion company right there alone.

David Welch: That’s huge.

Grayson Brulte: Yeah, it’s, it’s big bucks. ’cause what’s Waymo gonna get a $60 billion valuation, a $45 billion valuation.

David Welch: Yeah, I think that’s, I think we wrote that about six or eight months ago that that was the valuation bankers we’re looking at. That’s still pretty good. It might even be better now ’cause they’ve launched in a couple more cities.

Grayson Brulte: And today they announced they’re taking a road trip to the city of brother who love Philadelphia. I love their little cryptic note using, announcing that. So well done to the Waymo team on that. Do you think that it’s gonna take more clarity for investors of what Waymo’s business models At the end of the day, because I’ve been doing. Research and work on models where Ivo, at the end of the day, Waymo doesn’t wanna own the fleet, they don’t wanna own the operations. They purely wanna license the Waymo driver. Do you think that investors need to see that, what the clarity is of the business model?

David Welch: I think they do, and I think they also need some kind of modeling in terms of what, what does scaled up for robotaxis mean? And we, we, we used to hear it from crews, , and, and way more talks about getting to a certain level of scale and mobility. My discussions with them, they’ve talked about it as well, what does that mean and how big does that have to be? Right. , ‘Cause again, you know, the capital cost for this business, because the vehicles themselves have so much technology on board, it’s pretty expensive. And then everything you need to maintain them, , you know, remember when Cruz had the issue or a bunch of cars stalled out in that intersection? So that was, I think that was a connectivity issue, right? Whatever it was. I mean, you have to have backup systems so that these things don’t happen again. And, you know, Waymo hasn’t had, uh, too many issues like that, but, you know, all that costs money to make sure that these vehicles aren’t gonna just stop because of some glitch in the system. It’s just, it’s a level of cost that your, your network of Uber and Lyft and yellow cab drivers don’t have. So yeah, you’re taking that driver out, but then you’re adding all these other costs. So what, what’s the breakeven point? How big does this have to be? How many cars is that on the road? And, uh. How many fares per hour or or per day of operation do you need? I mean, think about all the metrics we use to look at Hertz and Avis, right? You got revenue per day, um, which tells you what kind of pricing you’re getting. You have utilization rates, usually 78 to 80%, uh, of your rented cars are, are out there at any given time. Um, so you have those measurements. So you know what’s, what are the equivalent measurements for a robot taxi company? And then, you know, how are you covering all those, those big technology costs? I think investors will wanna see that kind of thing.

Grayson Brulte: The breakdown, the, the cruise incident was at the Outside Lands Festival, where the cell service was jammed because of what was happening at the festival in Golden Gate Park. And that cruise that I, I remember the, the hiccup from that. So you can shut down the Sailor network or you can shut down an av. And thank goodness did it become Cone Gate 2.0. As we saw in San Francisco with the cones, you’ve done a lot of work on main mobility. You visited with Edwin in Ann Arbor. You’ve ridden the vehicle many times. They’re getting ready to launch on on Lyft in Atlanta next month. What are you thinking of that launch?

David Welch: that, was really surprising. Um, you know, for the longest time, may was they, they were, you know, they they were dealing with governments or corporate entities running shuttles to fixed points, fixed routes, which was a very smart way to go, right? Like go for the simple thing first. Like a lot of the trucking companies do. Um, so now they’ve got this thing, in, you know, in Atlanta, may is a company worth watching. They’re pretty well funded by NTT of Japan, which is like their at and t and Toyota and they’re doing some work over in Japan as well. And, and look, what a great market for autonomy because you have very congested cities in Japan and, and, and everything is packed so tightly over there. reduce, if you could reduce cars by, you know, having more robotaxis buzzing around, it’s great. So look, they’ve, they’ve got these, this support, financial and otherwise, and by the way, getting their vehicles and getting ’em, place, getting, you know, I’m sure NTT is helping out with the network, uh, over there as well. Uh, although I haven’t looked into specifically what they’re doing in Japan. , But you know, they, they, they’ve got some pretty good sponsors there and. They’re, they’ve, they’ve, they, I’ve been in their vehicle. It runs pretty well. They, they’ve got some pretty good technology. Are they? Where Waymo is, probably not, but they do have a low cost model for getting these vehicles going on the road.

Grayson Brulte: Outside of NTT, they also have the very strategic relationship with Toyota.

David Welch: You know, look, Toyota has a habit of like, very quietly investing in things like EVs and avs, and then when it gets to a certain point where it really works and there’s demand for it, that’s when they really pull the trigger and scale up. So it’s it’s pretty good. It’s a pretty good partner to have.

Grayson Brulte: When do you think we’re gonna get more clarity or, or I, perhaps, when will Bloomberg break the clarity around what’s going on with Waymo and Toyota? ’cause all there was was the public MOU. And wah wah silence. When are you guys gonna break the news on what’s really happening there?

David Welch: Well, you know, if any of your viewers have, uh, you know, an inside look at this thing, they can, they can reach out to me and lemme know, and I’d be happy to break it. Look, it, it’s, it’s a, it’s an interesting story and that’s, it’s a thread that, that, you know, we should be, uh, we’re gonna be pulling on. And I think a lot of others are too. , ‘Cause that’s another one of these relationships with a, a player with a lot of market share that, you know, big presence in Japan, obviously with a big presence here. And they make EVs, they make a lot of hybrids. Uh, they, they’ve, they’ve got technology in their cars that could be helpful if Wayman wants to, to work with them. And, you know, I don’t think this is something that Toyota wants to, Toyota doesn’t feel they have to own the autonomous technology. I, they’re happy to work with somebody else on this and they’ll work with multiple partners too.

Grayson Brulte: I think Toyota learned that lesson with all the. If you want to call all the parts they bought, including list level five program, they bought Renovo and all these parts, they put ’em together. Nothing really came of it, and perhaps the Toyota could be the first indication of Waymo’s shift towards licensing something. We’re gonna have to wait and see. What are your thoughts on when the Waymo Hyundai start coming on off the line and going into service in 2026?

David Welch: I haven’t really looked into it, but. I guess if we, if we look at Hyundai, MOU, with Toyota, how many companies is Waymo? How many automakers are they working on with at this point?

Grayson Brulte: So they have the public relationship with JLR, but that’s coming to an end. You have Zeer, you have Hyundai.

David Welch: J R’s coming in. they got Zeekr, they got Hyundai, MOU with Toyota. Am I missing anybody?

Grayson Brulte: No, but my intuition tells me there’s somebody else lurking out there. The question is who

David Welch: There been interesting comments from Farley about Waymo. Maybe there’s something going on there. You know, they don’t need one company. they could work with four or five if they wanted to.

Grayson Brulte: they should. The big thing to Farley just don’t show up in a Lincoln Navigator with a crew of security to the headquarters that it was well reported.

David Welch: but the thing about Waymo, by the way, like why would you wanna work with, you know, just one. A company like you, you’ll get better terms if you’re working with multiple companies and they all want a, they all want a piece of the action.

Grayson Brulte: Waymo’s, the clear leader in autonomy. We know big things are coming with Waymo, and yes, I believe you and I both, they probably have half a dozen deals by the time, and so the next 12 months they’ll have half a dozen deals. Now it says, David, as we head into the late summer. It’s usually quiet, but autonomy markets just keep chugging along. Anything that we really need to keep our eyes on until we have you back on in the, early fall.

David Welch: , look, the, the, the obvious one is what does Duffy and, and, and what do the Republicans do with fully self-driving vehicles that have no controls in them? ’cause, ’cause that could really, it could, first off, if you have real regulatory clarity, that could bring more money into the sector, more investment and, you know. That, that that’ll get more deployments, that’ll get more technological development. , It, it is who partners, who else partners with Waymo. And is there anything behind what Farley was saying when he was, uh, rather complimentary of Waymo’s approach to autonomy? Is there anything going on there that’s worth keeping an eye on? We didn’t talk much about trucking, but we’re starting to see a lot more action there. And, um, and you’re, you’re seeing more deployments, more money being raised there too. And, and what does the Trump administration do with that? I’m not sure that the Republican bill that, as it’s been kicked around, said much. about trucking. Did it? You read that too, right?

Grayson Brulte: Not much. Not much about trucking. I know the market wants certainty on it. ’cause You have two SPACs coming up this fall. You have the Kodiak SPAC and the plus spac. And so investors, as we clearly say, that they want certainty in the regulatory environment.

David Welch: And they’re probably pushing for it now. . So, you know, those are some interesting things. And, um, you know, what does GM do? Do they just kind of keep developing this, uh, internally slow and steady, uh, working at it? Or do they start to pair up with some of these other players who, you know, wave is out there too, right? They could work with Wave, and, and just, you know, be the hardware manufacturer. These are all possibilities story you watch.

Grayson Brulte: My bet. And you’re right, this story to watch is pairing up who, who, who’s gonna pair up with who, and then who’s gonna be the financing arm, and then who’s gonna be the operation arm? Because these companies are not gonna own the asset. They’re not gonna operate the asset. And then the question is that we’re, we don’t, if we get cleared by the fall, D and Uber have big ambitions and they’re growing ladder by the day. That’s something we need to watch and we’ll go to the trucking. D SPACs in the fall when we have you back on. Until then, the future is bright. The future autonomous, the future is scaling autonomy.

David Welch: Keep an eye on Tesla

Grayson Brulte: yes. Keep an eye on Tesla and, and watch the tweets from Elon.

David Welch: obviously. It’s the obvious one. Yeah. I mean, well, how fast they expand just in Austin, right? Do they expand hours of service, geographic area, the number of cars out there. And you know, a question I have for Tesla is do people really want to basically Airbnb their car out all day while they’re sitting in the.

Grayson Brulte: Somebody will, hell, I, I advise second card just to do it, just to experiment with it. Just to learn and I’m sure there’s quite other few people. My God.

David Welch: Hey, if you can cover your monthly payment on it why not make a few bucks?

Grayson Brulte: and if you could cover it for two cars, if your private car and your work car, it’s even better. Perhaps Elon knows something that we don’t know. David’s looking forward to having you back on again in the fall.

David Welch: Thanks Grayson, and always, always good to be here.

Key The Road to Autonomy Episode Questions Answered