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Self-driving cars haven't yet hit commercialization as they are still in the conception phase. But IHS Markit estimates that they could eventually make up over a quarter of new vehicle sales in the long run once adoption starts hitting critical mass in the next couple of years.
One of the best ways to tap into this opportunity is through Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL). The Google parent's self-driving subsidiary Waymo has clocked a massive technology lead over rivals that could soon translate into a lot of money. Here's why.
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In pole position
Waymo's cars have driven more than 5 million miles on public roads, mostly city streets, across diverse locations in the U.S. The company reportedly has thousands of self-driving cars in its fleet already, so it has already done the majority of the groundwork before the monetization phase begins.
The good part: Waymo's investments in self-driving technology have put it miles ahead of rivals. For instance, Waymo's self-driving cars clocked 352,545 autonomous miles on California roads last year, with the self-driving car system being disengaged only 63 times. This means that a human driver had to take control of the autonomous car only once every 5,595 miles.
Its next closest rival, General Motors, did only 125,000 miles, and that too with a higher disengagement figure of 105. So, GM's cars had to be taken over by a human driver every 1,254 miles. Such a huge lead has given Waymo confidence to launch fully self-driving cars that don't need a human driver, and the company seems all set to take the next step toward commercializing its technology.
First steps toward monetization
Waymo never wanted to make self-driving cars of its own. Instead, the company has been partnering with automakers to install its tech in their cars. Last year, the company announced that it will be tapping Fiat Chrysler's Pacifica Hybrid minivans to test its early rider program in Phoenix, Arizona, to get feedback about its autonomous taxi service by providing free trips.
The good news: Arizona's transport department has approved Waymo's application of offering its services as a transportation network company. The company now intends to launch its commercial taxi service later this year in Phoenix, allowing customers to hail a ride on its autonomous car using an app.
This would make Waymo the first operator of a commercial self-driving cab service in the U.S., and it won't be long before it expands this model elsewhere. In all, Waymo has tested its self-driving cars in 25 cities in the U.S., so it can quickly roll out its service in other areas based on the success it finds in Phoenix.