A Waymo self-driving car

Image Source: Waymo

Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) has been crushing its rivals in self-driving cars, according to the latest data from the California Department of Motor Vehicles. Alphabet's driverless car division -- Waymo -- reported the lowest disengagement rate among all the companies testing self-driving cars on California roads last year, meaning there were fewer times when the autonomous driving system had to be shut down.

How things look

The California DMV defines disengagement as either a failure of autonomous technology or the requirement of human intervention to switch off the autonomous mode. A lower disengagement rate indicates that Waymo's driverless cars have become better at driving themselves.

In fact, according to this data, Waymo is not just better than the rest; it is beating its rivals by a huge margin as its cars had a meager disengagement rate of 0.20 per 1,000 autonomous miles. This is down from the 0.80 disengagement rate in 2015. This seems even more impressive in light of the fact that Waymo vehicles covered longer distances than rivals and, as Techcnrunch reports, Waymo's autonomous vehicles and their engineers are set to err on the side of caution when deciding to disengage.


Autonomous miles driven in 2016


Disengagement per 1,000 miles

























Data Source: California DMV

A low disengagement rate and more miles driven indicate that Alphabet's moonshot self-driving technology is the most successful on California roads. More importantly, the lower disengagement rate has been accomplished mostly in suburban and city driving conditions. Waymo, therefore, seems to be closer than any other company to launching its self-driving project commercially.

This is not surprising as Alphabet (then Google) began working on driverless cars in 2009 and has the first-mover advantage. Since then, its autonomous cars have driven over 2 million miles, with most of the driving taking place on city streets. Additionally, Waymo clocked 1 billion miles on the simulator last year.

The amount of time and effort put in by Alphabet's Waymo into the self-driving car project has placed it way ahead of the curve in autonomous driving. This might eventually turn Waymo's driverless rivals into potential clients if they are unable to replicate the success of its driverless tech.

Waymo's rivals could start using its technology

Waymo calls itself a self-driving technology company, not a car company. It currently uses a Lexus vehicle and a prototype of its own to test its driverless technology, while it is also plans to add 100 Chrysler Pacifica Hybrid minivans to the fleet.

Waymo logo

Image Source: Waymo

It is less likely that Alphabet will manufacture cars of its own as it seems to have charted out a different go-to-market strategy. In January, Waymo announced that it will start manufacturing sensors used in driverless cars in-house to integrate its hardware and software development. This integration should give Waymo a cost advantage and lead to stronger adoption of its driverless technology.

In fact, Waymo has reduced the cost to build a Lidar sensor -- the most crucial part of a driverless car as it uses lasers to generate maps of the car's surroundings -- by 90%. The price of a Lidar sensor was $75,000 in 2009, but it costs just $7,500 now. The integration of hardware and software under a single roof will allow Waymo to deliver seamless self-driving performance to potential customers as it is developing its sensors in association with machine learning experts.

As automakers can get turnkey self-driving solutions under a single roof, they will start turning to Waymo to power their self-driving cars. Fiat Chrysler Automobiles (NYSE: FCAU) is the first such example.

In May last year, Fiat Chrysler and Alphabet's Waymo struck a deal to develop 100 self-driving cars based on the Pacifica Hybrid minivan. This was Waymo's first deal with an automaker to supply its driverless technology. Last month, it was reported that both companies are going to double down on their efforts as Alphabet could add another 100 Pacifica Hybrid minivans to the Waymo fleet this year.

A Bloomberg report says Alphabet is in talks with Fiat Chrysler to start a ride-sharing service with the minivans. If that's true, it would indicate that Waymo is finally taking steps to monetize its driverless technology. Honda (NYSE:HMC), meanwhile, could be Waymo's next partner.

Both companies were in negotiations last December to put Waymo's technology into Honda's vehicles. A partnership could alter Honda's approach to developing its own driverless cars. The Japanese automaker initially wanted to get its self-driving cars onto highways by 2020, but Waymo could help it go a few steps further by adding city and suburban driving capabilities. A Honda press release says:

Honda previously announced its intention to put production vehicles with automated driving capabilities on highways sometime around 2020 related to its goal of a collision-free society. In addition to these on-going efforts, this technical collaboration with Waymo could allow Honda R&D to explore a different technological approach to bring fully self-driving technology to market. These discussions are an initial step that will allow Waymo and Honda R&D to further explore the potential of a broad range of automated driving technologies.

The takeaway

The latest California data clearly indicate that Alphabet's Waymo has a far better driverless technology than any of its rivals. Waymo is using this to its advantage by partnering with automakers and showing them the strengths of its self-driving technology. This strategy of advertising its superiority in this space is a smart one as it can help Waymo win over potential clients, making it a key player in the driverless car supply chain.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.