Uber would be a 'natural strategic partner for Waymo in NYC': Jefferies

Waymo has applied to New York City's Department of Transportation to test autonomous vehicles with safety drivers in Manhattan, signaling its ambition to expand into the complex urban environment. Jefferies analysts believe commercial deployment is still years away due to regulatory hurdles, political climate, and existing rideshare dynamics. However, Waymo's existing partnership with Uber in other cities, where autonomous vehicles have demonstrated efficiency, suggests a potential strategic role for Uber in Waymo's New York entry, leveraging Uber's established platform and local market presence.

Analysis

Alphabet's Waymo has formally initiated its entry into the challenging New York City market by applying to test autonomous vehicles (AVs) with safety drivers in Manhattan, a move underscoring its technological ambitions despite significant headwinds. Jefferies analysts project that actual commercial deployment in NYC is likely 'years away,' citing critical obstacles such as the current legal framework requiring a human driver, the city's complex political climate, severe street congestion, and the established presence of approximately 80,000 rideshare drivers. Nevertheless, Waymo's expansion effort, building on its existing paid services in cities like San Francisco and Phoenix where it conducts 250,000 rides per week, is viewed as a testament to its advancing capabilities. A key strategic element highlighted by Jefferies is the potential for Uber to facilitate Waymo's NYC market entry, leveraging their existing partnerships in Phoenix, Austin, and soon Atlanta. Notably, in Austin, Uber reported that the average Waymo AV completes more trips per day than 99% of local human drivers, demonstrating AV efficiency on an established platform. Jefferies posits that Uber, which derives a low single-digit percentage of its gross bookings from New York, could be the 'most likely consolidator of AV demand' due to its scale and ability to support AV developers in logistics, pricing, and fleet management, potentially aiding Waymo in navigating NYC's regulatory and market complexities.

Key Decisions for Investors

• For Alphabet (GOOGL) investors, Waymo's New York application signals long-term strategic intent and technological advancement, but the projected multi-year timeline and substantial regulatory and operational hurdles in this specific market warrant a patient outlook.
• Investors in Uber (UBER) should consider the positive implications of its deepening partnerships with AV developers like Waymo, as its platform and market expertise could position it as a key enabler and consolidator in the autonomous vehicle ecosystem, potentially unlocking new revenue streams even in complex markets like New York.
• Monitoring New York State legislative changes regarding autonomous vehicle operation and the execution of Waymo-Uber collaborations in other cities will be crucial for assessing the pace of AV adoption and its impact on both companies.