Waymo Takes Another Step Towards World Domination

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Waymo, the self-driving car unit of Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), announced this week that it would be adding as many as 20,000 Jaguars to its growing fleet of self-driving cars. Testing on the Jaguar I-PACE all-electric sport-utility vehicle would begin this year before becoming part of Waymo's fleet in 2020. Jaguar, a division of Tata Motors (NYSE: TTM), noted that Waymo was "the only company with a fleet of fully self-driving cars -- with no one in the front seat -- on public roads." Waymo said that the vehicles could combine to complete over a million trips on an average day.

Waymo also gave insight into its long-term aspirations, saying (emphasis mine), "With this partnership, we can offer our self-driving service to many communities across the country with vehicles that are safe, quiet, and eco-friendly."

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This is the latest step taken by Waymo that could upend the paradigm of driving as we know it.

Taking over the roads?

This is a huge move by Waymo and speaks to the extent of the company's ambitions in the space. A fleet of this size could potentially replace the majority of cars in a small- to medium-sized community, according to a 2013 research study by Columbia University's Earth Institute. The team, led by Professor Lawrence D. Burns, found that 71% of the 740,000 trips in a given day were less than 70 miles, and that the average vehicle was used only 67 minutes per day in Ann Arbor, Michigan. The research concluded that 18,000 self-driving cars could replace an estimated 120,000 of the 200,000 vehicles owned by residents.

This isn't the first sizable addition to Waymo's fleet -- though it is by far the largest. Just last month, in a joint statement with Fiat Chrysler Automobiles N.V., the company announced that it would be adding "thousands" of Chrysler Pacifica minivans to its stable, though it didn't say precisely how many.

That announcement was made in conjunction with the revelation that Waymo plans to debut "the world's first driverless ride-hailing service" in the Phoenix metro area later this year. In January, Waymo received approval from the Arizona Department of Transportation to operate as a transportation network company in the state. The license allows the company to pick up and drop off paying customers in Arizona via a website or smartphone app, according to a spokesman for the agency. Waymo said it was taking all the steps necessary to launch its commercial service later this year.

Waymo has been testing its ride-hailing service in the area around Phoenix since April 2017, via its free "early rider" program. The company plans to bring its testing to a second commercial market later this year, and will ultimately expand internationally. Waymo has tested its vehicles in a variety of driving environments across six states, recently adding Georgia and Michigan to the list.

Billion, with a "B"

Analysts Brian Nowak and Adam Jonas of Morgan Stanley attempted to put a value to Waymo last year. They determined that if Waymo could eventually command just 1% of the vehicle miles driven globally, and charge $1.25 for each mile driven, the unit would be worth more than $70 billion.

The combination of ride-hailing and self-driving cars is a natural fit and Alphabet has been known to play the long game. The company began testing autonomous vehicle technology back in 2009, and graduated Waymo from one of Alphabet's "moonshots" to a business unit in 2016. The company has racked up more than 5 million miles on public roads in addition to billions of simulated miles. Waymo removed the safety drivers from its vehicles back in November, achieving Level 4 autonomy, according to the company. This indicates that while no human is operating the vehicle, it is limited to the area contained in its mapping system. Having no humans at the wheel marks the next phase of Waymo's evolution.

Head of the class

California recently released the annual disengagement reports supplied by self-driving car companies -- which reveal the number of times a human safety driver took over the driving task for safety or testing purposes. Waymo generated 352,545 self-driven miles in the preceding 12-month period that ended in November. During that time Waymo cars had only 63 disengagements -- and the company said these were part of the testing process.

Add this to everything else we know about the company's progress, and it all goes to show just how far ahead of the pack Waymo really is.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Alphabet (A shares). The Motley Fool owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). The Motley Fool has a disclosure policy.