Al Root

Tesla has some AI-related automotive competition.

Alphabet's Waymo and Toyota Motor announced a preliminary agreement on Tuesday to "explore a collaboration focused on accelerating the development and deployment of autonomous driving technologies."

Simply put, Toyota and Waymo are working on self-driving cars for consumers and for commercial applications, such as robotaxis.

Self-driving features for personally owned vehicles muscle in on Tesla's Full Self-Drivin g product. Many auto makers, including Toyota, have driver assistance products, but Tesla's FSD can do most of the driving most of the time. (It still requires drivers to pay attention to the road all of the time.) FSD also improves as Tesla sends out new software updates.

FSD helps Tesla sell more Teslas. Better driver assistance features can also help Toyota sell more Toyotas.

FSD is also the basis for Tesla's robotaxi business, which plans to start in June in Austin, Texas. Investors have high hopes that robotaxis will spur a new era of earnings growth for the company.

Tesla uses AI computing to train and improve its autonomous driving features, like Waymo.

Waymo completes more than 250,000 driverless taxi rides a week and is expanding to new cities in 2025. The Toyota/Waymo partnership could eventually lead to more Waymo robotaxis or a Toyota-branded robotaxi service.

That means more competition for Tesla, but the robotaxi business is still relatively small and growing. Americans drive more than 3 trillion miles a year, and only a tiny fraction of that demand is served by driverless robotaxis.

New partnerships and advancements also mean that more self-driving cars are on the way. In a few years, investors and taxi riders may not give much thought to driverless cars or driverless partnerships.

For now, announcements are still exciting.

Shares of Alphabet were 0.1% lower in premarket trading at $160, while S&P 500 and Dow Jones Industrial Average futures were down 0.3% and 0.1%, respectively. Tesla stock was down 1.1% at $288.69.

Write to Al Root at allen.root@dowjones.com

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April 30, 2025 05:18 ET (09:18 GMT)

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