Wall Street is hotly discussing Luobo Kuai Pao! Goldman Sachs: Will be profitable by 2025

After 11 years of development, RoboTaxi has finally shown its muscles this summer. Now, even major Wall Street firms are "stepping into the ring" for it, debating whether its initial success in Wuhan can be replicated elsewhere, ultimately aiming at the car rental industry.

On the 16th, Goldman Sachs expressed optimism about RoboTaxi's development prospects in its latest research report. Analysis believes that with the expansion of autonomous driving fleets, RoboTaxi could achieve profitability as early as 2025.

Previously, JP Morgan stated that if RoboTaxi improves its profitability, it could achieve a city-level breakeven in the second half of 2024.

The market's biggest concern: Is RoboTaxi profitable or not?

Let's start with Goldman Sachs' conclusion: Baidu's goal is to expand its fleet in Wuhan to 1,000 RT6 (Hongqi 06) vehicles, and it is expected that in the next 2-3 quarters, RoboTaxi's business will achieve unit economic breakeven in Wuhan, and profitability in 2025.

In terms of unit profit, Goldman Sachs believes that there are three key factors for improvement:

▲ Average trip price. This refers to the discount level compared to regular taxis or ride-hailing services (Baidu Robotaxi currently offers an 80% discount), with the forecasted discount reaching 40% by 2025.

▲ Vehicle utilization/trip frequency (currently above 60%).

▲ Number of safety personnel per vehicle. Currently, 1 person monitors 2 vehicles. It is expected that with technological advancements, the number of vehicles monitored by each safety personnel will gradually increase to 3.

Furthermore, Goldman Sachs is very optimistic about the release of the next generation RT6, with a total cost of about 250,000 RMB, representing a cost reduction of approximately 50-60% compared to RT5. Goldman Sachs predicts that by 2025, the unit economic breakeven for each RT6 will turn positive, with the average daily operating profit per vehicle ranging from 25 to 300 RMB, and the annual profit for 1,000 RT6 vehicles reaching 9 million RMB.

Goldman Sachs further stated that with the expansion of operational areas and increased operating hours, the daily order volume in Wuhan in 2025 will rise to 22 orders, similar to traditional ride-hailing services. As the discount intensity gradually decreases, the average revenue per order in 2025 will reach 14 RMB, with the daily revenue of each RT6 version of RoboTaxi being 308 RMB.

Benefiting from the successful trial operation in Wuhan, fully autonomous driving is rapidly spreading, as stated by Goldman Sachs in the research report:

In the first quarter of 2024, Baidu's Apollo Go service operated 300 autonomous driving taxis in Wuhan, with about 70% of orders being fully autonomous. By the second quarter, more autonomous driving taxis were put into operation, and the penetration rate of fully autonomous vehicles continued to rise

JP Morgan: "Key Variables" to Improve Profitability

In the financial report released on the 11th, analysts at JP Morgan pointed out that the key variables to improve the profitability of Roobee Fast Run are: pricing, vehicle costs, and the ratio of vehicle safety officers. By improving these three points, Roobee Fast Run may achieve a break-even point in a single city in the second half of 2024.

JP Morgan believes that despite the serious financial losses facing the autonomous taxi business in Shanghai currently, if these three variables are strengthened in commercial deployment, Baidu's profit margin in a single city is expected to increase significantly by the second half of 2024.