Dropping Prices Bodes Well For Waymo's Driverless Car Technology

The value proposition is compelling. Rather than buy a car that you have to actively drive, Alphabet (GOOG) spinoff Waymo's recent price break on self-driving car technology will allow you to buy a car that can drive itself for as little as $7500 to $10,000 more.  This is not a futuristic vision. Hybrid electric Fiat Chrysler (FCAU) Pacifica Minivans using Waymo's self-driving technology are scheduled to be on the streets later this month. 

The technology is still in the testing stage. Nonetheless, the potential is staggering should the cars be cleared for market.  

The technology should appeal and be available to middle-class families as the cost of this technology is quickly dropping. Waymo's announcement that it can now produce the technology in-house for roughly $7500 per car is a game changer as it reflects a 90% drop per car in the cost of this technology. The system has been tested over more than two million miles. The technology relies on short, medium and long-range LiDAR sensors that map a three-dimensional picture of the surrounding terrain and then guides the vehicle to react in tandem with its surroundings.  

Middle-class families with seniors who want additional assistance in actively operating a motor vehicle could soon have the opportunity to buy a car with an autopilot feature that provides the technological promise of being a second set of eyes for the older driver. 

Likewise, families with younger drivers who may lack the experience of driving on crowded streets in densely packed urban areas could soon have the reassurance that the car could drive itself if necessary through those crowded roads.

The business model carries less risk for Alphabet and Waymo than would if they build its own cars. Waymo does not produce its own automobiles. Rather it has an arrangement with other companies such as Fiat Chrysler to install its technology in their automobiles. This permits Alphabet and Waymo to benefit from Fiat Chrysler's reputation and brand equity while avoiding the capital investment needed to create a new car company and brand.  

Theoretically, a consumer already looking for a new Fiat Chrysler minivan might be attracted to the self-driving capability as an added feature. Here is the "first look" of Waymo's self-driving system in a Fiat Chrysler minivan.

The quickly dropping technology price is not limited to this supplier. Velodyne's Lidar system now retails for $7999. Expect more partnerships between self-driving car tech companies and established automotive brands, with more aggressive price competition.Hyundai is said to be considering an arrangement with Waymo in the near future.