Robotaxis can be seen running on the roads of San Francisco and Los Angeles in the US and Beijing and Shanghai in China. These driverless cars are gaining fast traction worldwide and are expected to become a new norm in the coming years.
Automation has already impacted our mobility big time with the introduction of steering wheel-free electric vehicles (EVs). Now, technological advancement is taking this even further to make our lives even more convenient.
With urban populations soaring and road congestion increasing, Robotaxis are offering a promising solution to the problems of rising pollution and declining safety.
Robotaxis has actually been in development for a long time now. Research for these autonomous vehicles first began in the 1980s and about a decade ago, the first robotaxis were introduced to the public. In 2020, people officially began hailing these self-driving cabs.
While still in the early development phase, the global autonomous vehicle market is expected to grow from $1,921.1 billion in 2023 to $13,632.4 billion by 2030.
In terms of autonomous levels, the L1, L2, and L3 segments have the largest market share, with full autonomy yet to be achieved, and L4 and L5 segments are in the developing stage. Meanwhile, based on vehicle type, the market is divided into passenger cars, which have a dominant share, and commercial vehicles.
The autonomous vehicle market growth is driven by advancements in technology, including artificial intelligence, sensors, and connectivity, which are improving the capabilities of autonomous vehicles and making them more efficient and safer.
While technological innovation remains a critical force in boosting these vehicles’ viability for widespread adoption, challenges like complex urban environments, adverse weather conditions, and unpredictable situations pose difficulties for current autonomous systems. Also, the lack of clear and consistent regulatory frameworks is creating uncertainties and acting as an obstacle to the widespread deployment of autonomous vehicles.
Still, the autonomous driving market is a fast-growing one, which, according to McKinsey, could create $300 billion to $400 billion in revenue by 2035. But this is just the tip of the iceberg as Cathie Wood’s Ark Invest expects robotaxis to generate about $34 trillion in enterprise value by 2030, as per its latest report, ‘Big Ideas 2025.’
Against this massively positive backdrop, let’s take a look at where robotaxis currently stands and where they are heading.
What Are Robotaxis? The Workings of Self-driving Cars
Robotaxis, also called driverless taxis and self-driving taxis, are simply autonomous cars that pick up passengers and drive them to their destinations without the intervention of a human at any time.
According to the Society of Automotive Engineers (SAE), there are six levels to driving automation, which are as follows:
Level 0 (No Driving Automation)
Vehicles at this level are manually controlled, with humans providing the “dynamic driving task.” There are still systems in place, such as the emergency braking system, to help the driver. Most vehicles that are on the road today belong to this category.
Level 1 (Driver Assistance)
At this stage, vehicles get the lowest level of automation, with the driver responsible for monitoring the system. A single automated system is available here for driver’s assistance, such as steering or accelerating.
Adaptive cruise control (ACC) to maintain a safety gap from the car in front, lane keeping assist (LKA) to help keep the car in its lane, reversing assist, and park assistance are all examples of driver assistance systems.
Level 2 (Partial Driving Automation)
At this level, we get advanced driver assistance systems or ADAS. The vehicle comes with the capability to control steering and accelerating/decelerating. This automation level requires a human to be present in the driver’s seat in order to take control of the car at any time.
Tesla Autopilot and General Motors’ Super Cruise systems for Cadillac, Chevrolet, and GMC vehicles are examples of Level 2 automation.
Level 3 (Conditional Driving Automation)
From a technological point of view, vehicles at this automation level come with the ability to detect surroundings and make informed decisions like accelerating past a slow-moving vehicle. The human driver, however, is still required to be alert and prepared to take control if the system is unable to execute the task.
Currently, Level 3 automated vehicles are gaining ground, which make use of sensors including LiDAR and RADAR, cameras, actuators, powerful processors, and artificial intelligence (AI) and machine learning (ML) to emulate human-like decision-making on the roads. All this technology enables robotaxis to map their surroundings, navigate, detect obstacles, and respond to voice commands.
Volkswagen Group’s luxury automaker Audi’s A8L is an example of a Level 3 vehicle that features an AI Traffic Jam Pilot that handles driving in traffic jams or slow-moving highway traffic. Mercedes Benz S-Class, with its autonomous highway cruising and Honda Legend’s hands-free driving in particular scenarios, are other examples.
Level 4 (High Driving Automation)
Once a vehicle reaches this level of automation, it doesn’t require human interaction in most situations. However, a human still has the option to manually override. The vehicle is the one that intervenes if there is a system failure or if anything goes wrong. Vehicles at this level have the ability to operate in self-driving mode.
Due to infrastructure limitations and legislation restrictions, the existing Level 4 vehicles are mainly geared toward ridesharing. Alphabet’s Waymo has been testing its self-driving taxi service in several US states. Meanwhile, Baidu’s robotaxi division, Apollo Go’s sixth generation of driverless vehicle RT6 made its official debut last year with an upfront cost of under $30K.
Level 5 (Full Driving Automation)
This is the highest level of automation where there’s absolutely no need for human attention. With full driving automation, these cars won’t be geofenced or have steering wheels or acceleration/braking pedals, for that matter. They will operate independently in all weather conditions and roadways.
These vehicles are in the research phase, with companies aiming to reach this ultimate level. Level 5 vehicles will need to meet stringent safety demands and achieve the minimum risk condition in the event of system failure.
All these different automation levels show that the future of self-driving cars is exciting. But more importantly, these robotaxis promise a brighter future with their many benefits.
Economic Impact of Robotaxis
Autonomous vehicles are gradually becoming a commercial reality and with that, we are going to benefit from the many advantages that these robotaxis offer.
For starters, no human drivers translate to reduced human errors, which means safer roads. The use of sensors and advanced algorithms further reduce traffic by allowing robotaxis to map alternate routes.
Robotaxis would even free up all the parking space for other uses. Research shows that private cars spend a vast majority of their time in parking spots, not just one but at least two, at home and work. A shift to on-demand shared mobility would reduce congestion significantly. By making shared rides more accessible and efficient, robotaxis will not just alleviate urban congestion but also reduce the cost of transportation.
Cost-effectiveness is a major benefit of autonomous vehicles. For instance, the base fare of China-based Baidu’s robotaxi starts as low as 55 cents compared to about $2.50 for a human-driven taxi. These cost savings have allowed Apollo Go to gain traction in the domestic market, where Baidu provided 988,000 rides in Q3 2024, which represents a 20% year-over-year growth.
Meanwhile, Ark Invest estimates that autonomous taxis could cost consumers as little as $0.25 per mile, though the rides are likely to be priced close to human-driven ride-hail in the early days before increased utilization and scaling drive them down. At $0.25 cents per mile, the company expects ride-hail to create a $10 trillion market by serving a much larger population than currently served by human-driven services.
Besides having no human drivers, the declining costs of advanced battery tech, as per ARK, would collapse the cost of transportation, which, in turn, should unlock micro-mobility and aerial systems. The report noted:
“Autonomy should reduce the cost of taxi, delivery, and surveillance by an order of magnitude, enabling frictionless transport that will increase the velocity of ecommerce and make individual car ownership the exception rather than the rule.”
Operating without human drivers not only reduces labor costs significantly but also enables new mobility business models. This includes on-demand services as offered by existing providers Uber (UBER +6.73%) or Lyft (LYFT +0.92%), where passengers pay for each trip, and subscription-based services, where users pay a flat monthly fee. The opportunities are massive here, which will benefit everyone, from consumers to businesses.
These fully automated electric taxis also have substantially lower energy consumption and zero tailpipe emissions. Unlike gas and diesel-powered vehicles, robotaxis can be hybrid, solar-powered, hydrogen-powered, or fully electric, which means they contribute to a greener environment. This aligns with the global efforts to protect the environment and achieve sustainability.
According to a 2018 study 1, if vehicle electrification, vehicle automation, and ridesharing are adopted at the same time, it would reduce traffic congestion by having 30% fewer vehicles on the road, cut transportation costs by 40% in terms of fuel, infrastructure, and vehicle, and reduce urban CO2 emissions by 80% worldwide by 2050. These massive benefits will be further topped up with improved walkability and livability.
These benefits present robotaxis as a practical approach to addressing some of the most pressing challenges in urban transportation. By offering affordable, convenient, and sustainable transportation options, robotaxis are emerging as a great alternative to car ownership as well as public transportation.
Challenges with Robotaxis
While these robotaxis promise more efficiency, lower costs, cleaner air, and smarter mobility solutions, they are not without their issues.
The biggest challenge robotaxis currently face is safety. For instance, late in 2023, General Motor’s (GM -1.29%) Cruise struck and seriously injured a pedestrian who had been hit by another vehicle. This resulted in the company shutting down its robotaxi business, in which it had invested more than $10 billion since 2016. However, the company is still working on accelerating autonomy at scale on personal autonomous vehicles.
These vehicles are also facing regulatory complications. Given that they are different from regular cars, regulators are struggling with proper policies to dictate them. In the US, another problem is the difference in regulations at the state and federal levels.
The lack of clear and standardized guidelines makes it difficult for these vehicles to earn regulatory approval and build public trust.
In fact, research suggests that the public is reticent about riding in self-driving vehicles. Earlier last year, a Waymo robotaxi was damaged and set on fire by people in San Francisco, a city that is popularly used for the testing of such vehicles.
Safety continues to be the most common concern among the public. In 2021, about 61% of respondents were worried about potential safety issues due to machine error, and about 51% were concerned with safety issues due to human error.
Robotaxi manufacturers claim that their vehicles are safer than human-driven vehicles, citing a National Highway Transportation Safety Administration (NHTSA) research paper that states that 94% of crashes are due to human error.
So, by eliminating humans from the equation, automakers argue robotaxis offers a safer alternative. However, that’s yet to be seen. But more importantly, autonomous vehicles are still facing an uphill battle in convincing people to hire one despite having clocked up millions of miles on public roads.
According to a Pew Research Center Survey from 2022, almost two-thirds of Americans said they wouldn’t want to ride in a driverless passenger vehicle even if they had the opportunity. While at 37%, the number is still high, it has come down from 44% in 2018.
Public concerns could be attributed to the limited availability of robotaxis. They are currently limited to a select few cities, which means the majority simply remains unfamiliar with the technology.
Furthermore, robotaxis depends on high-resolution mapping and data processing capabilities, which need to achieve high levels of accuracy and reliability to ensure passenger safety. These technologies are complex and expensive and require advancement to make robotaxis truly safe. Moreover, robotaxis continues to be unprofitable so far and needs scaling to achieve cost benefits.
So, the adoption of autonomous vehicles currently faces some major challenges in terms of high operational costs, underdeveloped technology, and public skepticism, all of which need to be overcome before they can fully realize their benefits.
Investment Hotspots: Major Robotaxi Players
Robotaxis are currently being actively researched, tested, and deployed all over the world, with China and the US in the lead, followed by the Middle East and then Europe.
But this journey was a troubled one with most automakers having dropped out of the autonomy race over the years. So, let’s take a look at the handful of key players in the sector who are still here helping advance the space.
1. Tesla (TSLA -3.52%)
Elon Musk’s electric carmaker is also making headway in the robotaxi business with a fleet of driverless cars set to roll out this June. Just last year, the tech billionaire had unveiled a prototype for a specialized “Cybercab” with Musk saying in an earnings call that Tesla will soon begin offering its existing self-driving models as a “paid service”. This service will begin in Austin and then expand to other regions by the end of this year.
These robotaxis will offer fully autonomous rides on demand. They will also be upgraded with an unsupervised version of Full Self-Driving (FSD) software, which Musk claims will also be available to Tesla owners “everywhere in America” soon. This will potentially pave the way for the Tesla Network, where people will be able to rent out their own Teslas as part of a shared, driverless fleet though it is still a bit far off. Tesla also has yet to get a permit for the same.
Ark Invest, however, has big expectations from Tesla, calling for the company to achieve a 50% market share of 50 million robotaxis by 2030.
The $1.2 trillion market cap Tesla’s shares are currently at $368.50, down 9.18% YTD. When it comes to company financials, Tesla’s Q4 2024 revenue came in at $25.707 billion, while non-GAAP earnings were $0.73 per share. While its gross profits were down 6% year-over-year in the quarter despite selling more regulatory credits, Tesla remains profitable, and its cash stack has grown to $36.6 billion.
Tesla, Inc. (TSLA -3.52%)
During this quarter, the company produced about 459,000 vehicles and delivered over 495,000 EVs. Tesla’s sales in January 2025 declined across Europe amidst a backlash against Musk, who now holds a position in President Donald Trump’s administration.
2. Waymo (Alphabet) (GOOGL -3.39%)
Waymo is currently leading the robotaxi industry, having accomplished more than 22 million driverless miles. It first began offering driverless robotaxi service five years ago and now provides 15,000 paid rides a week across Phoenix, Los Angeles, and San Francisco.
These numbers are nowhere close to Uber, which facilitates around 200 million trips every week worldwide. To improve its numbers, Waymo has partnered with Uber to operate a robotaxi service in Austin and Atlanta and as part of that agreement, Uber app users in the region now get an invitation to signal their interest in a Waymo robotaxi though they can’t hail a ride with it yet.
For now, the company boasts the largest fleet of over 700 cars in the US. To further improve its numbers, it has also been working on building its reputation, having launched an online safety hub. Waymo recently also talked about its teleoperation center publicly, which provides human assistance in ambiguous situations.
However, Waymo’s dependence on LIDAR and higher-cost auto manufacturers are highlighted by ARK as a drag on its competitive positioning.
Waymo is owned by Google’s parent company, Alphabet, which has a market cap of $2.25 trillion, with its shares currently trading at $185, down 2.45% YTD. It pays a dividend yield of 0.43%. Last year, Alphabet announced that it would make a $5 billion multi-year investment in Waymo to enable it “to continue to build the world’s leading autonomous driving company.”
Alphabet Inc. (GOOGL -3.39%)
As for company financials, Alphabet’s revenue was $96.47 billion and earnings per share were $2.15 for Q4 2024, and shared plans to spend $75 billion on capital expenditures to build out its AI offerings.
3. Aurora Innovation (AUR +1.41%)
The Sequoia Capital and Amazon-backed company was founded in 2017 by autonomous vehicle industry veterans — Sterling Anderson; who led the development and launch of Tesla’s autopilot program, Drew Bagnell; who helped launch Uber’s efforts in autonomy; and Chris Urmson; who led Google self-driving project before it spun out to become Waymo.
The autonomous vehicle technology company has been focused on Aurora Driver to bring increased utilization, efficiency, and safety to fleet owners. It recently delayed the commercial deployment of its autonomous truck to April this year so that it can continue to validate its self-driving technology.
According to ARK, robotrucks face much bigger hurdles to commercialization than robotaxis in terms of logistics, regulation, and partnerships in addition to data/testing/validation.
Aurora will go to market as a carrier, but its end goal is a driver-as-a-service model, wherein carriers buy trucks with the Aurora Driver tech on board. The company has been testing commercial loads with FedEx, Uber Freight, Schneider, Werner, Hirschbach, and others.
The $12.25 billion market cap company’s shares (AUR: Nasdaq) are currently trading at $7.13, up about 14% YTD. At the end of Q3 2024, the company had $1.4 billion in cash and investments after it raised almost half a billion dollars in August.
“We are on the brink of a new era in mobility and logistics,” said CEO Urmson, who noted about adding nearly half a billion dollars to the company’s balance sheet and lane expansion to Phoenix. “Our Commercial Launch is within sight, and we are in an incredibly strong position to deliver on our mission and commercialize autonomous trucking at scale,” he added.
Conclusion
Robotaxis has begun to enter the market with a promise of convenience, cost reductions, and improved safety. These self-driving cars are expected to grow significantly with technology advancements, infrastructure investment, and regulatory clarity. And the more the robotaxis become a common occurrence, the better the perception of people towards these autonomous vehicles.
This is just the beginning, though, as robotaxi services have only begun to emerge in select cities. In the next decade, as the technology matures and safety improves, robotaxis could gain mainstream adoption and by the 2040s, robotaxis should be expected to become a common sight on our streets. So, the future of autonomous vehicles is bright with robotaxis poised to revolutionize urban mobility with smarter, more efficient, and sustainable urban transportation.
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Study Reference:
Fulton, L. M. (2018). Three revolutions in urban passenger travel. Joule, 2(4), 575-578. Available online 28 March 2018. https://doi.org/10.1016/j.joule.2018.03.005