Waymo vs. Zoox: The Race for Autonomous Dominance in San Francisco

Introduction

Waymo, launched as Google’s Self-Driving Car Project in 2009, leads the AV race with a mission to be “the world’s most trusted driver” (Waymo, 2024). Prioritizing safety and accessibility, it aims to reduce traffic deaths and restore mobility for non-drivers. In the dynamic AV market, Waymo faces competition from innovative entrants like Zoox, the focus of this paper.

Fig 1: Waymo car in action on the streets of San Francisco. The company has a vast testing history using artificial intelligence models learning from more than 20 million miles of autonomous driving in the real world, placing them ahead of competitors such as Cruise and Zoox.

While both companies operate in the AV ride-hailing space, their business models and strategies differ significantly. Waymo retrofits conventional Jaguar vehicles with autonomous systems, aiming to become “a better taxi-cab,” as reflected in its “most-trusted driver” tagline (Waymo, 2024). In contrast, Zoox takes a revolutionary approach by designing carriage-style vehicles from the ground up for mobility-as-a-service. Zoox aims to disrupt transportation with a subscription-based model, eliminating parked cars, reducing pollution, and potentially making car ownership a costly, outdated concept (Sustainability at Zoox, n.d.).

Fig 2: Zoox, being tested on the streets, can drive in either direction, which makes turning the car around a thing of the past.

In this paper we explore how Waymo might respond to Zoox’s entry and fleet expansion in the Bay Area, using a game-theory payoff matrix to analyze and map the competitive dynamics.

Fundraising and R&D costs

Figure 3: The timeline illustrates the funding trajectories of Waymo and Zoox. Zoox initiated its funding rounds in 2014, progressing through multiple stages before being acquired by Amazon in 2020 for over $1 billion, positioning it with a strong capital base and a strategic backer. In contrast, Waymo began its first funding round in 2020 with substantial support from Alphabet, raising $3.2 billion in Series A funding, followed by additional rounds in 2021 and 2024.

Waymo, with Alphabet’s backing, invests heavily in research, safety, and real-world testing, supporting its premium positioning and aligning with its goal of domination through safety. Zoox on the other hand, benefits from Amazon funding and access to Amazon Elastic Compute Cloud which offers extensive computing which accelerates testing and development for large amounts of data and improves its speed to market by using hundreds of petabytes of data on AWS. It aims to balance innovation with cost efficiency as their strategy is costly upfront but promises lower operational expenses long-term (Team, 2024).

Figure 4: This chart highlights Waymo’s significant lead with an estimated valuation of $45 billion compared to Zoox’s $3.2 billion with the disparity bringing attention to Waymo’s dominant market position and strong investor confidence driven by its extensive testing history, and brand equity associated with Alphabet (Presence of investors like Tiger Global and Andreessen Horowitz further cements this). In contrast, Zoox’s lower valuation reflects its relatively recent market entry and higher costs associated with building purpose-designed AVs.

It’s also important to note that Zoox has far more ambitious long-term goals, to make owning a car redundant. With Zoox’s capital-efficient R&D period, higher time investment, eccentric custom-made consumer-centric vehicles, and subscription-based pricing model, they might be a far more lethal competitor than one might expect looking at the slow-paced company today.

Considering that both companies have already invested a lot of time and money into their products, which have already been launched, we will also assume that they have already approached the maximal returns on R&D and will now be getting diminishing marginal returns for any extra time and capital invested in R&D, since that takes away from building a brand and getting more miles under their belt. (Taylor and Francis)

Figure 5: A visualization showcasing the diminishing marginal returns, with the single factor of production being R&D in this case. The companies already have a launched product that can be profitable, thus both have reached maximal returns and now will be getting diminishing returns.

Market Share

Through analyzing the case study of Uber dominating the taxi industry, we see that in this area of the transportation industry having a bigger market share is often the difference between a company surviving and a company going bankrupt. This is due to the fact that a higher market share means more rides more often, which means less downtime and cars traveling shorter distances in between passengers (higher asset utilization). Thus market share is very directly linked to profits. It is fair to assume that both companies will rush to take over as much of the market as possible. (National Bureau of Economic Research)

Waymo provides over 150,000 rides per week in San Francisco, a significant increase over the past year. As public awareness and acceptance grow, Waymo is well-positioned to further capture a significant share (Alphabet’s Waymo , 2024).

Zoox on the other hand, launched merely four days ago in the city, and currently holds none of the market share, requiring quick and clever thinking to succeed.

The autonomous car industry holds minimal market share within the transportation industry, with a hesitant consumer sentiment, who worry about privacy and safety issues. Thus both companies would benefit from increasing trust in AVs which will increase their piece of the pie as they take more market share from conventional ride-hailing services and public transport.

Figure 5: The map shows us the US cities with Waymo (green) and Zoox (purple) presence. The opaque markers indicate existing operations, while the less visible markers show planned expansions. Notably, San Francisco is the only city where both companies currently operate, making it an ideal location for analyzing their competitive dynamics.

Demographic and Pricing

Waymo follows a premium pricing strategy costing ~30% more than traditional services to the consumer, reflecting high R&D and operational expenses. While higher costs would traditionally limit adoption among price-sensitive consumers, it resonates with Waymo’s key demographic who prioritize safety and privacy, making Waymo an attractive alternative to traditional services for these groups (Velazco et al., 2024).

Figure 6: Mapping out the consumer persona for Waymo makes it easier to determine what their key customers would value (Waymo, 2024). This persona demonstrates Waymo’s target market for its premium services, highlighting a consumer segment that values safety and is willing to invest in innovative, reliable transport solutions. For certain consumer demographics, such as business professionals, parents, and women who prioritize safety and reliability, Waymo’s pricing may still be attractive despite the premium cost.

Zoox on the other hand offers a subscription-based model ($100 to $300 monthly). By allowing users to pay a monthly fee rather than per ride, Zoox addresses one of the biggest barriers to AV adoption — cost predictability (The4, 2024). This means it is well positioned to compete with public transportation as well as ride hailing services.

Figure 7: Consumer Persona for Zoox: For consumers who rely on public transportation or ride-hailing multiple times a day, a subscription offers a financially attractive alternative, similar to public transit passes in major cities, which provide unlimited access for a set fee. According to a McKinsey survey on consumer preferences, more than 60% of millennial and Gen Z consumers prefer subscription services for their flexibility and predictable cost structure. Zoox’s pricing model taps into this trend, providing a “mobility as a service” solution that could replace car ownership for city dwellers.

Building on consumer personas, we connect elements of value provided by each business to their customers to take a nuanced approach and understand that despite similarities there are various elements specific to each model.

Figure 8: Waymo emphasizes safety, reliability, and quality, appealing to consumers seeking risk reduction and premium experiences. In contrast, Zoox focuses on affordability, variety, and environmental integration, catering to cost-conscious, eco-friendly consumers. Despite overlapping value areas, each company’s unique model aligns with its target demographics and strategic positioning.

Lastly, we conduct a SWOT analysis to understand the contextual foundation for strategic moves.

Figure 9: The SWOT analysis highlights the contrasting strengths, weaknesses, opportunities, and threats for Waymo and Zoox. Waymo leverages its brand trust, safety record, and urban fleet to target high-value segments, while Zoox focuses on its low-cost model and Amazon backing to scale in price-sensitive markets. Both face regulatory risks and competition, but unique opportunities like urban expansion and Amazon synergies provide distinct growth pathways.

Consumer Behavior and Indifference Curve Analysis

Zoox’s entry into the market shifts consumer dynamics by introducing a cheaper alternative to Waymo’s premium services. Through the lens of indifference curve analysis, we observe how Zoox’s pricing strategy pivots the consumer’s budget constraint outward, allowing them to achieve higher utility levels. Prior to Zoox’s entry, consumers faced a steeper budget line, limited by Waymo’s higher prices, and optimized their utility at a lower indifference curve. With Zoox’s more affordable subscription based rides, the budget line pivots outward, reflecting increased purchasing power and enabling consumers to afford more rides or reallocate savings to other goods, ultimately achieving higher satisfaction.

Figure 10: The graph illustrates the outward shift of the consumer budget constraint and a shift to a higher indifference curve, driven by Zoox’s entry with lower prices. This shift signifies increased purchasing power and higher consumer utility, reflecting how Zoox’s affordable pricing strategy expands market accessibility while Waymo maintains appeal among consumers valuing premium attributes.

This shift underscores Zoox’s appeal to price-sensitive customers and expands by reaching those previously excluded. Their eccentric look could go either way, either people might see it as consumer-focused like how the company sees it, or they might find it foreign and odd. Waymo retains consumers who prioritize brand name, safety, and trust, justifying its higher price point. We must remember however that drastically reducing prices early upon launch might be a challenging decision for Zoox, as startups must balance aggressive growth with sustainable monetization.

Game Theory

The strategic interactions between Waymo and Zoox are best modeled as a repeated, continuous game, allowing infinite strategic adjustments based on observed competitor behavior. This fosters adaptability, as both companies prioritize long-term viability alongside immediate gains. To reflect their pioneering roles in autonomous vehicles (AVs), equal emphasis is placed on sustained market presence and profitability.

Table 1: The payoff matrix illustrates the strategic interactions between Waymo and Zoox based on their choices: Lower Prices, Focus on R&D, and Targeted Expansion. Each cell contains the payoffs for Waymo (left) and Zoox (right), with brief outcome descriptions. These payoffs leverage evidence from market segmentation, brand positioning, and competitive strategy, illustrating a balanced coexistence where cost, innovation, and consumer targeting drive differentiated outcomes.

The payoff matrix highlights choices: Lower Prices, Focus on R&D, and Targeted Expansion, with payoffs informed by market segmentation, brand positioning, and competitive strategy. Looked at through rational choice and prospect theory both firms avoid focusing on R&D due to diminishing returns and the risk of reduced market share and profits. For Waymo, lowering prices contradicts its premium brand, which emphasizes safety and privacy at higher price points, potentially diluting its image and profits. Thus, Waymo’s dominant strategy is strategic expansion, aligning with its niche.

Similarly, Zoox benefits less from lowering prices due to limited profit margins and the potential for a price war. Strategic expansion emerges as its dominant strategy as well. With both firms favoring expansion, a Nash equilibrium is found, maximizing profits while minimizing direct competition. This approach mirrors retail and airline industries, where brands prioritize geographic and demographic segmentation, ensuring sustained profitability without eroding their market positions (Frostbolt, 2024).

Welfare Effects of Zoox’s Entry

More competition dents producers’ surplus but Zoox’s entry enhances consumer welfare; affordability expands accessibility as illustrated by shifting the budget constraint outward on the indifference curve analysis above. This also encourages innovation and efficiency as self-driving electric AVs reduce costs and negative externalities across the transportation industry.

Figure 11: As Zoox enters the market, we see an increase in consumer surplus, while some profit from Waymo is taken away. Overall, there is far less deadweight loss and consumers get all the benefits.

A consequential concern is also the market-wide unemployability of drivers as autonomous cars take over the market. This concern, while not relevant to our analysis, is still important to consider as consumers switch to AVs.

Word Count: 1169 words.

AI Statement: AI (GPT 4o) has been used to summarize a large number of articles to determine which ones have relevant info and which ones don’t. This was helpful as AV landscape is an exciting topic where a lot of people have things to say. AI has also been used to formulate sentences in a ‘report writing’ style as this not only saves time, but also makes the paper more readable and easy to digest. No research or analysis was done by AI as it only guided me in the right direction from where I took charge to determine what information to include in this assignment.

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