WeRide goes public as self-driving reaches its commercial tipping point
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WeRide goes public
WeRide, a Chinese self-driving company, went public today after pricing its IPO at $15.50 per share, the low end of its $15.50 to $18.50 range. The startup sold 7,742,400 shares in its IPO, along with a massive chunk of equity (~$320 million) that went out via concurrent private placements.
For a deeper dive into WeRide, its economics and progress to date, read CO’s reporting on the company’s F-1 filing.
IPOs are so rare in the current moment that we’d normally spend the entire newsletter today looking at the resulting WeRide valuation. But since Waymo is hellbent on not ceding the self-driving spotlight, it somewhat spoiled WeRide’s big day by announcing its own, larger fundraising event.
Shares of WeRide are currently worth $17.45 per share, up 12.6% from its IPO price. Not a bad start. Now, onto the even bigger news.
Waymo’s new round is enormously exciting
Back in July, Alphabet told investors that it would invest a huge slug of capital into its self-driving business. As outgoing CFO Ruth Porat said at the time:
As you will see in the 10-Q, we have chosen to commit to a new multiyear investment of $5 billion. This new round of funding, which is consistent with recent annual investment levels, will enable Waymo to continue to build the world’s leading autonomous driving technology company.
Here’s how the company described the investment in an SEC filing:
In July 2024, Alphabet committed to fund up to $5.0 billion for the ongoing operations of Waymo, a fully autonomous driving technology company and a consolidated VIE.
Today, Waymo announced an “an oversubscribed investment round of $5.6 billion, led by Alphabet, with continued participation from Andreessen Horowitz, Fidelity, Perry Creek, Silver Lake, Tiger Global, and T. Rowe Price.” Sounds like Alphabet found plenty of other checkbooks to fill out the round, implying that there is some room left its funding commitment to bolster Waymo as it scales.
Good. The self-driving shop is going to need a lot of capital.
It would be easy to look at the Waymo round and shrug. More capital for a business that has been growing is not a surprise. And since the Waymo project has been in the works for a very long time, why care about another chunk of funding going into what has been a historical technology project long on promises and short on delivery?
Because Waymo has turned the corner from a technology project to a commercial business, and it needs capital not merely to continue building out its self-driving system, but to scale it fleet.
Investing to bolster capacity is very different than putting capital to work on foundational technology. As Waymo itself wrote when announcing its new fundraising event:
This year has marked incredible commercial progress towards our mission to be the world’s most trusted driver. We’ve expanded our Waymo One service areas in San Francisco, Los Angeles, and Phoenix, including providing curbside service at Sky Harbor International Airport. Through our expanded partnership with Uber in Austin and Atlanta, we’ll begin to serve riders in those cities in 2025. To create an even more useful experience, we've begun fully autonomous freeway operations in Phoenix and San Francisco. These efforts have enabled us to provide over 100,000 paid weekly trips—a tenfold increase from last year.
Notably Waymo only has four-digits worth of cars in commercial operation by current estimates. CO took a whack at that number, coming up with something around 1,000; Reuters pegged the number at around 700 in August. No matter which estimate you prefer, the number is small.
And yet Waymo is now handling comfortably north of 100,000 paid rides each week. That implies that each self-driving car can handle something like 100 rides per week, or more than 14 per day. Throw a $15 per-ride average — a number that I just pulled from thin air — and each Waymo robotaxi can generate a few hundred dollars per day, and the fleet maybe a quarter million per day.
For Alphabet, I presume that that figure is worth around seven seconds of YouTube ad revenue, but the current rate is not what I find exciting. No, its the insane ramp that Waymo went on before it announced its most recent fundraise:
November, 2023: 700,000+ trips taken
May, 2024: 50,000+ weekly paid trips
August, 2024: 100,000+ weekly paid trips
From a base of 1,000 cars or fewer, that’s an impressive trajectory. (You can quickly scale up the numbers by doubling Waymo’s fleet in your head, and then expanding the resulting paid ride capacity of the company; and if you want, scoot the average ride fee to grow or shrink Waymo’s resulting run rate.)
Don’t worry about TAM limiting Waymo’s future growth. There is a huge market to sell into. If Waymo can keep replicating its early success in cities like San Francisco and Phoenix, it has a good shot at eating into Uber and Lyft’s billions of yearly domestic rides. (Waymo is working with Uber, so the two companies are not at odds, per se. Yet, at least.)
But if Waymo has to spend $100,000 or more on each of its self-driving cars, does the Waymo math really math? Or is Alphabet merely investing in a project that appears to have commercial momentum, but is really in the business of selling dollar bills (the cost of self-driving cars, and their maintenance) for $0.50?
I don’t think so. When Waymo announced its sixth-generation vehicle it heavily hinted that it had dramatically reduced its their per-unit cost. Therefore we have the following situation on our hands:
Waymo has built self-driving technology that can handle millions of driven miles with a safety record that allows it to stay on the road.
Waymo has built a robotaxi business using its self-driving technology that has proven itself in mostly temperate climates.
Waymo has onboarded enough early users to reach six-figures worth of rides per week at prices that are roughly industry-standard, if not slightly higher.
Waymo is working to drive in less sunny climes, implying that its geographical footprint will be able to expand in the coming quarters.
Waymo has reduced the cost of the marginal robotaxi it adds to its fleet, thanks to its new gen6 cars.
And, Waymo just raised a god’s ransom worth of capital to go faster.
Call me crazy if you must — the children have been sick, so I come to you again today with residual sleep-debt — but that looks to me like it’s Go Time At Waymo. I doubt that the round would have come together if the underlying economics of Waymo weren’t attractive, which based on the above, they seem to be.
Real, in-world, commercially-viable self-driving taxis are coming to a city near you. Quickly. That has me standing up and cheering; we’re going to save lives, save time, and in time reduce the cost of getting around. And I’ll never again have to take a car in to get its oil changed.
Inshallah.