Waymo’s Driverless Car $30 Billion Valuation and Business Model

Charles Goulding of R&D Tax Savers examines driverless car market opportunities for 3D printing.

An early March 2020 business news headline focused on a $2.2 billion cash investment valuing an autonomous driving tech development company, Waymo, at over $30 billion.  For the 3D printing industry, the more interesting developments may be Waymo’s indication that it is not only open to changing its business model instead of trying to do it alone, but also the powerful resources of some of its new investors and partners.

Waymo’s CEO John Krafik stated that their future focus may be on the driverless technology and instead leaving the rest of the car production to others in the industry. This reminds us of the Intel Inside business model. This strategy change may be sensible since traditional car assemblers have over 100 years of experience making cars and it hasn’t been easy for the driverless community to make rapid progress. One of the challenges clearly underestimated by the driverless industry is satisfying federal, state and local regulators.

One of Waymo’s interesting investor partners is Magna International.  Magna, one of the largest companies headquartered in Canada, has almost 170,000 employees and is the largest OEM auto parts suppliers in North America. Magna makes seating systems, power and vision systems, as well as auto body parts.

Although driverless electric cars eliminate the need for many traditional drive chain mechanical parts, seating system and body parts have continuous growth opportunities and are well suited to 3D printing applications. Magna is known for “lightweighting” technologies, which effectively reduce the need for total vehicle fuel and power sources.

Waymo also has an alliance with Renault Nissan, a relationship that could prove interesting particularly for opportunities in Japan and France.

R&D tax credits are available for driverless car technology innovation.

The Research & Development Tax Credit

Enacted in 1981, the now permanent Federal Research and Development (R&D) Tax Credit allows a credit that typically ranges from 4%-7% of eligible spending for new and improved products and processes. Qualified research must meet the following four criteria”:

• Must be technological in nature

• Must be a component of the taxpayer’s business

• Must represent R&D in the experimental sense and generally includes all such costs related to the development or improvement of a product or process

• Must eliminate uncertainty through a process of experimentation that considers one or more alternatives

Eligible costs include US employee wages, cost of supplies consumed in the R&D process, cost of pre-production testing, US contract research expenses, and certain costs associated with developing a patent.

On December 18, 2015, President Obama signed the PATH Act, making the R&D Tax Credit permanent. Beginning in 2016, the R&D credit can be used to offset Alternative Minimum tax for companies with revenue below $50MM and, startup businesses can obtain up to $250,000 per year in payroll tax cash rebates.

Conclusion

The willingness to be flexible and revise a core business model is normally a good trait.  A partnership model with strong partners that add values can be an excellent way to overcome daunting challenges. The 3D printing industry now has an expanded universe of driverless car market opportunities.