It’s been an exciting second half of 2022 for consumer autonomy – Mobileye is going IPO (despite some of the worst market conditions ever), Qualcomm and Nvidia have hosted auto-focused investor relations events, and Tesla, Mercedes, GM, and Ford continue to make progress on their L2+/L3 systems. So why all of a sudden so much buzz? After decades of focus on robo-taxis, both investors and the market are waking-up to the other (and perhaps the more exciting) autonomy market – Consumer Autonomy.
Consumer Autonomy – Past & Present
Most of the attention, (public and investor) over the past decade in autonomy has been focused on mobility-as-a-service, robo-taxi, robo-trucking, and robo-delivery players like Waymo, Cruise, and the like. These businesses have been capital-intensive and highly challenging to deliver technically, operationally, and regulatorily. But the good news is that there are finally some early signs of progress, as multiple carriers are now offering driverless rides in test cities. The more everyday people start to see and accept the L4 automation of their transit rides, the more they will ask “why can’t my car drive itself like this too?”.
Enter the personal, or consumer autonomy market. For years driver assistance technologies, “ADAS” have been available, and are now standard in most cars sold today. But from an investor point of view, this hasn’t been a great market. The market was really driven by a single vendor, Mobileye, who built a chip-based product that enabled cameras in cars to provide basic safety and comfort features like auto-emergency braking (AEB), lane-keeping assist (LKA), adaptive cruise control (ACC) and a host of other features. The problem? These features rapidly became a commodity, and over the past decade Mobileye’s basically been stuck at ~$50/chip, a.k.a. $50/car. Despite much engineering and many new features over the years, $50/car has been nearly constant. And once that car leaves the factory/dealership, all opportunity for future revenue from that car/driver is gone until a decade later when a new car is bought.
So why is this market all of a sudden getting exciting again? The shift from ADAS/Safety to real Consumer Autonomy (which includes higher levels of safety) is on. And the opportunity is on to make 10X – 100X more per car, as Consumer Autonomy is something that drivers truly value.
This trend isn’t lost on the vendors in this space, and while Mobileye “won” the legacy ADAS market, a whole host of new vendors are rising to compete for Consumer Autonomy. Just look at the recent news, events, and investor conference appearances dedicated to this space:
- Qualcomm hosted an auto investor day in September, identifying a $60B TAM by 2030 for software/compute for ASAS/AD. They see an opportunity for $200-$3,000/car for the capabilities they provide alone.
- Nvidia featured the auto opportunity at their 2022 Investor Day earlier this year, touting a $300B TAM by 2030 across autonomy and the digital cockpit, putting the self-driving value at $12K/vehicle.
- Mobileye, of course, is also taking on this opportunity, and their recent S1 notes a $120B combined opportunity for ADAS and AV technologies by 2030, with a target for ~$6K of value/vehicle for AVs.
Suffice it to say the opportunity is out there. When we at Ghost talk to investors, we commonly get two questions – how big is the overall TAM? And how much are consumers willing to pay for autonomy technology?
Consumer Autonomy TAM
Building a TAM model for future markets is always a challenge, but luckily the consumer auto market is well-forecasted, and the auto industry, while not always fast, is very good at rolling-out new technologies quickly across the fleet once they are proven and consumer demand is high (or when regulators push it, as in safety tech). Just look at the speed of basic ADAS adoption, or how quickly Apple CarPlay and Android Auto became nearly standard in cars.
The major market research houses are forecasting that we’ll get to roughly 100M consumer vehicles sold globally by 2030 (up from just under 80M in 2020). From there you can forecast how many cars will have varying level of autonomy (none, basic L2, enhanced L2+, or L3/4/5), and what will the ASP of the tech to supply that autonomy be? It’s also helpful to consider that different price bands of vehicles will be able to incorporate different price points of autonomy technology, and that as this tech standardizes it will come down in cost over time with volume. We thus estimated the autonomy technology (inclusive of software, sensors, and compute/ECUs) to range from a few hundred dollars/car for basic L2, up to thousands/car for a full L3/4/5 stack. These assumptions lead us to estimate the size the supply market for consumer autonomy technology to be >$110B by 2030:
To put it in words, the Consumer Autonomy market has the opportunity to be massive. Transitioning from $50/car for ADAS to hundreds-or-thousands/car for L4 autonomy turns this into a market that is worth investing in, and a market that is capable of sustaining many successful multi-billion dollar companies on the supply side.
Consumer Autonomy Price Point
This leads us to another key question – what will consumers pay for autonomy? This depends on many factors, including the safety of the technology and it’s adoption, the competition in the market, and the business models of the OEMs (charging for it up-front vs. as an ongoing subscription).
Irrespective of the sales model, we think a reasonable rule of thumb is that self-driving technology can increase the cost of the car (i.e. what the consumer is willing to spend) by 10-20%. The car OEM may charge for this as an option, a higher trim level, an ongoing subscription cost, or some mixture therein.
For examples, let’s look at the products in the market today, none of which are true L4 attention-free autonomy:
Even the L2+ versions of autonomy today are typically $5K+ upgrades, and the industry is trending to a subscription model with ongoing feature improvement which has the opportunity to extract much more value.
Another lens is $/mile. If you take the cost of autonomy and divide by the average miles driven, you end up with ~$0.10-0.20/mile, which is on-par with the cost of public transport, and again represents a ~10% premium over basic car ownership.
Zooming out from the numbers and the math a bit, we’re left with three conclusions:
- At $110B TAM by 2030, the Consumer Autonomy market is massive. While the robo-taxi/truck/delivery market may get the headlines, this market is perhaps even more attractive when looking at the opportunity vs. investment required balance to pursue it.
- There’s plenty of opportunity for multiple multi-billion dollar companies in this space. This isn’t a winner-takes-all market, rather the competitive dynamics of multiple OEMs and suppliers will likely create a much healthier market in this generation.
- The excitement about this market today is high, yet almost no one has yet experienced true L4 driving. Just wait until consumers really get the opportunity to spend their commute being productive or entertained vs. driving.
Ghost is excited to be pioneering L4 consumer autonomy with our automaker partners, coming soon to a driveway near you!