How much revenue can Google get from driverless cars?

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How much revenue can Google get from driverless cars?

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@Nag · Answer 1 · 2021-08-27T20:11:26+0000

This is an estimation question:

Step 1: Obtain Clarifications

1) Is the revenue analysis restricted only to US or entire world?

2) Do we have to consider usage of driverless car for personal as well as commercial use?

3) Is the revenue to be computed over a given number of years or one year?

Step 2: Main Equation

Assuming only the US market and only personal market

Total revenue from electric cars= Cars used for personal use potentially sold by Google * Avg price of car

Cars for personal use= # of households capable of buying an electric car * number of cars bought by a household

# of households capable of buying an electric car= Total number of households * % of households earning a min of 100K/year

Total number of households in USA= US Population/Avg number of people in a household = 330M /4 = 82.5 M.

% of households with yearly income> 100K = 15%.

Thus total number of households capable of buying an electric car= 82.5 Mn * 15%= 12 Mn.

12 Mn will already have one car hence ~30% might be looking for a 2nd car over 5 years(healthy life of car)= Hence Number of household lookig for a second car over 5 years= 3.6 Mn

Assume 20% of these cars will be electric cars, 720K cars of which Tesla is the market leader hence assume Google will get a market share of 15%.

Thus market for Google= 15% of 720K *35K/car = 3.7 bn over 5 years or about 756Mn/year

Sanity Check- This number still seems be too big. We seem to have overestimated the number of households wanting to buy a car in an year.

chandra-singh · Answer 2 · 2022-03-09T02:35:03+0000

Clarifications:

Can I assume revenue per annum? - Yes

Any specific country or global? – You can take US

What is the time frame Google is looking for: 2 years

Main formula:

For this quesiton, I would like to assume that in the first two years, revenue will be mainly from cars sold for personal use.

Also, in two years the market will NOT expand a lot due to Google's launch. Hence I will assume a cut from the current sales volume in the US. Had it been a longer period of time, it would have be appropriate to consider households.

$$ from selling driverless cars = #driver less cars sold per year by Google * price per car

Assume one key model sold by Google by Year 2.

Assume price per car = USD 50K

(I would like to assume that Google will maintain a higher price point in the beginning. This is lower than the price of Tesla models, however still a premium price)

#driver less cars sold per year by Google

= Current number of driverless car sold in US * market growth in next 2 years * potential share of Google

Assume Tesla sold 200,000 units of driverless cards in a year

(this can be revalidated though Google, assuming an appropriate number here)

Tesla covers 60% of market share (assumed)

Total US market size for Driverless cars = 340,000 units per year

Assuming by 2nd year, Google takes a 10% market share and also market grows by 20% in next 2 years, #units sold by google = 1.2*340K *10% = 40K

$$ = 40K* 50K =USD 2B

Quick validation: Google will do less than 1/5 of Tesla. 40K = 1/5 of 200K. With a 20% market growth, numbers seem correct.