LAGUNA BEACH, Calif.—Google parent Alphabet Inc. is graduating its self-driving-car project from its research lab X into a stand-alone business, said X chief Astro Teller, a major step in the vehicles’ path to commercial operations.

The car group’s finances were separated from X on Jan. 1 this year, and now the team is completing a series of corporate and legal moves to become its own business, Mr. Teller said in an interview at the WSJDLive 2016 tech conference.

As its own stand-alone business under Alphabet, the car group would likely be expected to soon begin generating revenue, though not necessarily a profit at first. Mr. Teller declined to disclose the car project’s planned business model.

“The world is going to have cars that are sold to individuals and cars that are shared by individuals, and which one Alphabet does, we have our thinking on it,” he said. “But right now we’re very focused on safety.”

Mr. Teller said Alphabet will likely roll out its self-driving cars incrementally over the next several years as they improve with more time on the road. For example, the group could choose to launch the cars commercially in just a handful of cities with favorable roads and weather, before expanding to more challenging roadways and climates, he said.