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It's not often that $10 trillion markets appear. But that's exactly what is happening right now with the robotaxi market.
"We think US$8 [trillion] to US$10 trillion for the entire autonomous taxi opportunity throughout the world, from almost nothing," predicts Cathie Wood, the CEO of Ark Invest. "That's how quickly AI is going to cause these things to happen."
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You could bet on this opportunity by buying self-driving technology stocks. But the best idea may be to buy EV stocks. That's because the robotaxi revolution won't be powered by gasoline or diesel. Electric vehicles are simply the superior choice for robotaxis, given their fuel economy and tech-heavy designs.
The robotaxi market needs physical vehicles to function. Automakers specializing in EVs, therefore, will have a huge market to sell their cars to. But don't just buy any EV stock. There are two in particular primed to benefit.
According to global consultancy McKinsey & Co., the robotaxi market will begin to take off globally by 2030. "[R]obo-taxis will be the first commercial application for L4 in mobility -- not privately owned cars," a report from the firm recently concluded. The year 2030 is less than four years away. To capitalize on the robotaxi market opportunity, then, EV makers must already have a significant amount of manufacturing capacity online. Or, they must have very near-term plans to begin scaling production.
It's easy to see how Tesla (NASDAQ: TSLA) is already primed to dominate the U.S. robotaxi industry. The company already has massive amounts of production infrastructure stateside, and expects to scale production of its dedicated robotaxi vehicle -- the Cybercab -- through the end of 2026 and the start of 2027.
Tesla is arguably the only EV maker in the U.S. with the tech and manufacturing facilities necessary to attack the robotaxi market at scale. But there's one other EV maker that is working hard to catch up: Rivian (NASDAQ: RIVN).
Like Tesla, Rivian is investing heavily in autonomy and self-driving capabilities. It also brought its first affordable vehicle to market earlier this year: its R2 SUV. Having an affordable EV on the market is clearly a huge plus for a company's ability to target the robotaxi market. Indeed, Uber Technologies recently signed a $1.25 billion deal with Rivian in exchange for up to 50,000 R2 SUVs -- vehicles that will be used to power Uber's own robotaxi division.
There are many Tesla competitors worldwide scaling up production of EVs. I suspect there will be heavy competition throughout many parts of the world to produce robotaxi fleet vehicles, particularly from low-cost Chinese manufacturers that already have massive amounts of existing production infrastructure. But stateside, Tesla's ability to produce vehicles at scale with high levels of autonomy is unmatched. And in second place, I'd put Rivian, with Uber's recent order a testament to Rivian's growing robotaxi capabilities.
EV stocks haven't made the headlines much for several reasons. Federal incentives have rolled back significantly, reducing consumer demand. The elimination of other federal subsidies -- like CAFE credits given to automakers that produce low-emission vehicles -- has also reduced the profitability of pure EV makers like Tesla and Rivian.
But the long-term future of EVs isn't consumer sales -- it's robotaxi sales. Given the imminence of an inflection point for robotaxi growth, EV makers with existing production scale and affordable models have a structural advantage. Tesla is the clear winner here, with Rivian far behind but in second position.
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Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla and Uber Technologies. The Motley Fool has a disclosure policy.
EVs Are Out of the Headlines and That's Exactly Why These 2 Stocks Are Buys was originally published by The Motley Fool