Know-how is reworking transportation in an unprecedented means. Look no additional than Uber Applied sciences (UBER 0.87%) and Tesla (TSLA 1.35%) for examples.
Each corporations have already altered automotive transport in vital methods. Uber famously reimagined ride-hailing, whereas Tesla made electrical automobiles (EV) a viable various to gas-powered vehicles. Now, they’re bringing self-driving vehicles to the plenty.
Does this newest technological upheaval imply considered one of these companies is a good funding for the lengthy haul? Let’s study Uber and Tesla to reach at a solution.
Picture supply: Getty Pictures.
Uber’s strategy to automated vehicles
Uber has come a good distance from its origins as a taxi-service various. Whereas its core ride-sharing enterprise stays distinguished, the corporate expanded into supply providers beneath its Uber Eats model and now eyes a future the place autonomous automobiles (AVs) are a part of its choices.
Uber initially tried to construct its personal self-driving system however bought its tech in favor of a partnership technique. It is a sensible transfer.
Not solely do partnerships enable Uber to keep away from the excessive prices of setting up a driverless fleet, it allows the enterprise to hitch forces with market leaders all over the world. As an example, it solid partnerships with Alphabet-owned Waymo within the U.S., in addition to U.Ok.-based Wayve.
Uber’s Waymo alliance is testing self-driving providers in Austin and Atlanta. In keeping with Uber CEO Dara Khosrowshahi, the Waymo-powered automobiles are busier than the people driving for Uber, stating, “the typical Waymo in Austin is busier than 99% of Austin drivers.”
As well as, the remainder of the corporate is doing effectively. Gross sales rose 14% yr over yr to $11.5 billion within the first quarter. This translated into Q1 free money movement (FCF) of $2.3 billion, up 66% yr over yr, and internet earnings of $1.8 billion in comparison with a internet loss within the prior yr.
How Tesla tackles autonomous automobiles
Tesla might have began as a shopper automobile firm, however it too is stepping into autonomous vehicles. CEO Elon Musk shared his imaginative and prescient for the enterprise, stating, “The way forward for the corporate is essentially primarily based on large-scale autonomous vehicles and … huge numbers of autonomous humanoid robots.”
He went on to foretell, “we’ll begin to see the prosperity of autonomy take impact in a fabric means across the center of subsequent yr.” Tesla is on its solution to fulfilling Musk’s prediction. In June, it launched a restricted pilot program for its robotaxi service in Austin.
The corporate’s AV technique is to deal with your complete end-to-end course of from automobile development to delivering the service to finish prospects. This capital-intensive strategy makes extra sense for Tesla than Uber, for the reason that former already owned vehicle-manufacturing infrastructure and the mandatory software program capabilities.
Tesla started its robotaxi service utilizing a modified model of its Mannequin Y automobiles however plans to assemble a devoted autonomous automobile with no steering wheel known as Cybercab.
The corporate is taking steps towards its future, however for now, its enterprise is experiencing headwinds because of the present macroeconomic atmosphere. President Trump’s mercurial tariff insurance policies are impacting shopper spending with car tariffs seen as elevating automobile costs.
Tesla additionally made manufacturing facility adjustments that quickly restricted automobile manufacturing, contributing to a 9% year-over-year decline in Q1 income to $19.3 billion. Its Q1 internet earnings additionally dropped to $420 million from 2024’s $1.4 billion. On the intense facet, its FCF elevated 126% yr over yr to $664 million due to reductions in capital expenditures.
Making a selection between Uber and Tesla inventory
Uber and Tesla’s AV efforts place each to profit from the self-driving sector’s large progress within the coming years. Business forecasts estimate the worldwide AV market will broaden quickly from 2024’s $2 billion to $44 billion by 2030.
But even with that progress, the AV market might be solely a fraction of the ride-hailing trade Uber operates in, which is projected to hit $105 billion in 2030. Furthermore, the winners within the autonomous automobile sector will not be identified for years because the trade grows.
This makes Uber’s reliance on companions a sexy strategy. It reduces the price to take part out there and gives flexibility to collaborate with a number of gamers within the area.
However earlier than deciding which enterprise to put money into, one other issue to think about is inventory valuation. To evaluate this, here is a take a look at Uber and Tesla’s price-to-earnings (P/E) ratio.
Knowledge by YCharts.
Uber’s inventory has been on a tear in 2025. Shares are up over 55% via July 3. Even so, because the chart reveals, Uber’s P/E ratio is at a low degree in comparison with the place it was a yr in the past, and it’s miles beneath Tesla’s lofty earnings a number of as effectively.
This implies Uber shares are at a compelling valuation regardless of the inventory’s rise this yr. In the meantime, Tesla shares look overpriced.
Bearing in mind Uber’s valuation and a rising enterprise with an environment friendly strategy towards autonomous automobiles that limits its danger, Uber is the higher inventory to purchase proper now between these two transportation titans.
Suzanne Frey, an govt at Alphabet, is a member of The Motley Idiot’s board of administrators. Robert Izquierdo has positions in Alphabet, Tesla, and Uber Applied sciences. The Motley Idiot has positions in and recommends Alphabet, Tesla, and Uber Applied sciences. The Motley Idiot has a disclosure coverage.
