Rides In Waymo’s Ojai Help Reveal Robotaxi Future
I recently got to spend a weekend doing multiple rides in the new Waymo Ojai vehicle. The Ojai is made in China. A decade ago I forecast that robocars would be the likely entry point for Chinese cars into the U.S. market, though I underestimated how involved the political battles would be. Waymo imports the Ojai, made by Geely’s Zeekr brand, as a special variant of Zeekr’s SEA-M model line, sold as the Zeekr Mix in China. But what was also interesting was that I rode during a trial period where rides were free, which alters how you use it, offering a taste of the future robotaxi world where rides are low cost, and not taxi-cost. My actual experiences with the Ojai come in part 2.
Waymo gets the vehicles stripped down and pays about $38,000 for them, a great price for a vehicle with this feature set. They then pay over 125% tariffs on it, starting with President Biden’s 100% tariff on Chinese EVs and adding Trump trade-war era tariffs. Even at that grossly inflated price--made more when Waymo customizes the vehicle with its own sensors, computers and more--Waymo is still buying them in large numbers. Waymo also has plans to build a vehicle based on the Hyundai Ioniq 5. It’s still less than the cost Waymo paid to produce the Jaguar i-Pace vehicles which are its current workhorse.
Waymo pays this for a few reasons. First, they invested a decent amount of work into developing this vehicle until the tariffs came. Secondly, they are still at the development stage, and the cost of the vehicle isn’t really that big a factor in these volumes compared to all the other costs of developing and scaling their business. In the 2030s, vehicle cost will become a more important factor, and in fact it’s the largest single component of the “costs of goods sold” in an at-scale robotaxi ride. But it’s also still only about 1/3rd of the cost. (Vehicle cost, ie. depreciation, is about 45-50% of the total cost per mile of a mid-range newer car, less for used cars.) As such, even if you double your vehicle cost, you only increase COGS by a more modest 1/3rd. And for some years to come, the COGS don’t matter a lot.
Another reason is that it’s a big world, and other countries don’t have this tariff. China has become, by far, the value leader in automotive manufacturing, and it shows if you travel to other countries. On a recent trip to Latin America, I noticed almost all my Uber rides were in Chinese cars, because Uber drivers care about COGS and seek cars that offer the best value. In time, the USA will only be a fraction of Waymo’s global market, and a Chinese great-value car is an obvious choice. Indeed, it’s a must, because in many countries Waymo will compete with robotaxi companies like Baidu, Pony and WeRide who will naturally be based on Chinese manufactured cars.
Tesla, as an automaker, is focusing early on value, even before they have a working robotaxi. They have already started up the lines for the 2-seater “Cybercab” model that plans to come with no steering wheel. The Cybercab is a good expression of the approach first outlined by Larry Burns in 2011, that a robotaxi can be very low cost because the many things you take out (controls, dashboard, rear seats and much more) can save more money than the things you must add (sensors, compute, motorized doors.) This is even true with Waymo’s more expensive sensor package. But Tesla is starting early here--competition on price is still some years away. While Tesla is good at cutting costs, the Chinese are even better.
As I outlined in the article above the Chinese do not have recognized brands in the USA, and buyers are very nameplate-focused around the world. Nobody cares about the manufacturer’s brand on their taxi, though. They care about the Waymo brand. It’s the perfect way for unknown brands that are good at value to make it into a market. That’s why Alan Ohmsman (my editor at Forbes) recently reported that that while Americans can’t easily buy Chinese cars, Waymo has become the first ride in one for many.
Waymo obviously would prefer that these tariffs vanish as the political winds change. The reality is that the Chinese juggernaut is here, and it can only be kept out temporarily with this approach. Unless US automakers learn to compete with the Chinese, they will lose all their overseas markets, and barely retain their US ones. In the past, protecting US automakers from Japan gave them some breathing room but did not save them--it’s still controversial. And I am sure Waymo would be happy to acquire vehicles from a U.S. manufacturer that can offer similar quality and features for a price that’s even a little bit higher. Waymo is in charge, and will make the contract automakers of the world compete for their business.
One of my predictions that didn’t pan out concerned reliability. A decade ago, Chinese automakers did not yet have reputations for high reliability to match the Japanese or German automakers. There’s an interesting quirk with robotaxis. A personal car must be very reliable, because if it breaks down, the owner faces a lot of inconvenience and delay, getting it towed (if needed) and arranging service and getting alternate transportation. It’s a headache, and so it had better not happen. If a robotaxi breaks down (in a non-safety way) then even if it has a passenger in it, the worst is that another robotaxi shows up in 5 minutes to continue the trip, and the rider gives it no more thought. If it breaks down without a passenger, customers don’t even know. This changes the equation of how much you spend on mechanical reliability. But the truth is, in the intervening decade, the Chinese have made great strides in their quality of engineering. Electric cars also have far fewer parts to break.
The cars are good quality. While the Ojai does not have the furnishings of an expensive luxury sedan, nothing about it says “cheap” or low-grade, though its boxy looks will not appeal to all.
In the intervening years, Chinese brands have also started to make names for themselves. They are very common in the developing world, and starting to get strong in Europe. Soon they will arrive in Canada. When it comes to EVs, Tesla’s pioneering dominance is fading, and Tesla has switched to betting on making their self-drive system work.
In the 2030s, we will see robotaxi companies scaling up to large levels and competing for customers. When they do, cost will become one of the major competitive factors. Nobody wants to rush that, though. They don’t want robotaxi service to be a commodity, where price is the primary competitive factor, not for a long time. That’s why we see companies like Zoox spending extra to have a custom design with unique features, like face-to-face seating and more nimble maneuverability.
The Ojai shows a focus on things like comfort. It’s roomier and easier to enter and leave than other Waymos. Visibility is good and there are lots of screens and small features.
The Ojai will, once the steering wheel is removed, seat 5, 4 very comfortably. Tesla has decided to make a 2 seater with a very simple interior, and they say they can manufacture it under $30,000. It has a very large trunk space but almost nothing inside except a screen. Only the motorized lifting doors are a premium cost feature. Tesla hopes to make self-driving work with a very low cost all-camera senor suite. This will cost less than what other companies use, though thanks to the way prices always plummet on digital electronics, LIDARs and radars will not add a great deal to the cost in other vehicles.
Chinese cars are even cheaper. The BYD Seagull is sold in other forms outside China for more than its $10,000 in-China price. Complying with the US safety rules (FMVSS) might even double the price, but that’s still under $20,000. Some micro cars in China cost under $5,000, but they do not meet FMVSS. Half-width cars, good for just one passenger or two passengers in-line or face to face, could be even cheaper to make (and also more energy efficient.) Cars on 3 wheels can bypass FMVSS but still get good safety in other ways, in particular partly just by being a safer-driving robocar. In addition it is predicted that EVs can be made for much longer lives than traditional gasoline cars. If a vehicle lasts for 500,000 miles instead of 250,000 then its depreciation cost per mile is naturally lower.
However, if the cost of the vehicle is just 1/3rd of the cost of the robotaxi, you can make the vehicle free and still not drop the COGS all that much. Other costs (cleaning/depots, charging, servicing) can become the dominant costs. During growth, R&D is the overwhelmingly dominant cost. Work will be put into reducing them.
Stay tuned for Part 2 to read about the actual Ojai experience, as well as what happens when robotaxi rides get cheaper.