Waymo chief John Krafcik indicates his company is now willing to surrender control over many parts of the customer experience in deals with automakers.

Waymo’s latest investors reportedly didn’t grant it as high of a valuation as some on Wall Street have in recent years.

Citing “people familiar with the transactions,” The Financial Times reports that Waymo’s recent, $2.25 billion, funding round valued Alphabet’s (GOOG) - Get Report self-driving unit at more than $30 billion. While such a valuation makes Waymo worth more than General Motors’ Cruise self-driving unit, which was valued at $19 billion in a May 2019 funding round, it’s well below some prior analyst estimates.

Last September, Morgan Stanley’s Brian Nowak assigned Waymo a $105 billion valuation, after having previously valued it at $175 billion. And in a note that was published after the $2.25 billion round was disclosed, JPMorgan’s Doug Anmuth said his firm’s talks with investors indicated Waymo is worth more than $50 billion, and possibly much more.

Also: In March 2019, The Information reported that Waymo, which is believed to have been a major contributor to the $4.8 billion 2019 GAAP operating loss reported by Alphabet’s “Other Bets” segment, was seeking external funding at a valuation “at least several times” that of Cruise. Cruise was valued at $15 billion in its most recent funding round up to that point.

The relatively low valuation reportedly granted to Waymo in its recent funding round could partly be a reflection of how near-term expectations for autonomous driving have become more tempered. Though Waymo arguably has a technology lead and has launched a driverless taxi service known as Waymo One in a portion of the Phoenix metro area, much more work still needs to be done (from all indications) before cars supporting Level 4 or Level 5 autonomy are ready for large-scale commercialization.

In addition, Waymo’s reported valuation could partly be a reflection of the struggles it has seen to date to form close partnerships with major automakers.

To date, Waymo has inked deals with Fiat Chrysler (FCAU) - Get Report and Jaguar Land Rover to buy vehicles that it subsequently retrofits with its self-driving systems and adds to its vehicle fleet. And it has also formed a partnership with Renault Nissan to “explore driverless mobility services” in France and Japan.

However, Waymo hasn’t yet obtained a commitment from a major automaker to use its self-driving systems within internally-designed vehicles that they could either sell to third parties or use to support their own autonomous driving services. And while an auto parts supplier (Magna International), a car dealership chain (AutoNation) and several investment firms took part in Waymo’s latest funding round, apparently no automakers did.

Judging by past media reports and commentary from auto industry execs, concerns about surrendering too much control over autonomous driving R&D and the autonomous car user experience have led Big Auto to remain wary of Waymo in spite of its technology advances. Instead, they’ve pursued internal autonomous driving projects that rely on processors and complementary software supplied by Nvidia (NVDA) - Get Report or Intel’s Mobileye (INTC) - Get Report unit, or (in the case of Tesla (TSLA) - Get Report) on proprietary silicon.

At the same time, comments made by Waymo chief John Krafcik to the FT suggest that his company is open to revamping its strategy in order to better appeal to automakers.

Krafcik indicated that Waymo could focus on simply providing its “Driver” -- Waymo’s term for its autonomous driving hardware and software -- to third parties, while “leaving the rest of the customer [experience] to others in the industry.” By comparison, Waymo’s test vehicles and Waymo One services leave the company responsible for many aspects of the user experience beyond the Driver.

In addition, Krafcik suggested that the Renault Nissan partnership could result in driverless taxi services that don’t feature Waymo One branding, and for which “customer touch points” are handled by Renault and Nissan.

Such a strategy change could reduce the amount of long-term revenue that Waymo is able to generate in theory. But if such a move helps the company win over some automakers who have kept it arm’s length to date, it might ultimately allow Waymo to be more commercially successful in practice.

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