Know-how is remodeling transportation in an unprecedented manner. Look no additional than Uber Applied sciences (UBER 0.87%) and Tesla (TSLA 1.35%) for examples.
Each firms have already altered automotive transport in important methods. Uber famously reimagined ride-hailing, whereas Tesla made electrical autos (EV) a viable different to gas-powered automobiles. Now, they’re bringing self-driving cars to the lots.
Does this newest technological upheaval imply certainly 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 cars
Uber has come a great distance from its origins as a taxi-service different. Whereas its core ride-sharing enterprise stays outstanding, the corporate expanded into supply companies underneath its Uber Eats model and now eyes a future the place autonomous autos (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 good transfer.
Not solely do partnerships enable Uber to keep away from the excessive prices of establishing a driverless fleet, it allows the enterprise to affix forces with market leaders around the globe. For example, it solid partnerships with Alphabet-owned Waymo within the U.S., in addition to U.Okay.-based Wayve.
Uber’s Waymo alliance is testing self-driving companies in Austin and Atlanta. In keeping with Uber CEO Dara Khosrowshahi, the Waymo-powered autos are busier than the people driving for Uber, stating, “the common Waymo in Austin is busier than 99% of Austin drivers.”
As well as, the remainder of the corporate is doing nicely. Gross sales rose 14% yr over yr to $11.5 billion within the first quarter. This translated into Q1 free money move (FCF) of $2.3 billion, up 66% yr over yr, and web earnings of $1.8 billion in comparison with a web loss within the prior yr.
How Tesla tackles autonomous autos
Tesla might have began as a shopper automobile firm, nevertheless it too is entering into autonomous cars. 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 automobiles 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 cloth manner across the center of subsequent yr.” Tesla is on its approach 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 building to delivering the service to finish clients. This capital-intensive strategy makes extra sense for Tesla than Uber, because the former already owned vehicle-manufacturing infrastructure and the required software program capabilities.
Tesla started its robotaxi service utilizing a modified model of its Mannequin Y autos however plans to assemble a devoted autonomous automobile with no steering wheel referred to as Cybercab.
The corporate is taking steps towards its future, however for now, its enterprise is experiencing headwinds because of the present macroeconomic surroundings. President Trump’s mercurial tariff insurance policies are impacting shopper spending with car tariffs seen as elevating automobile costs.
Tesla additionally made manufacturing unit modifications that briefly restricted car manufacturing, contributing to a 9% year-over-year decline in Q1 income to $19.3 billion. Its Q1 web 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 because of reductions in capital expenditures.
Making a selection between Uber and Tesla inventory
Uber and Tesla’s AV efforts place each to learn from the self-driving sector’s huge progress within the coming years. Business forecasts estimate the worldwide AV market will develop quickly from 2024’s $2 billion to $44 billion by 2030.
But even with that progress, the AV market will likely be solely a fraction of the ride-hailing business Uber operates in, which is projected to hit $105 billion in 2030. Furthermore, the winners within the autonomous automobile sector will not be recognized for years because the business grows.
This makes Uber’s reliance on companions a lovely strategy. It reduces the fee to take part out there and gives flexibility to collaborate with a number of gamers within the house.
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 have 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% by July 3. Even so, because the chart exhibits, Uber’s P/E ratio is at a low degree in comparison with the place it was a yr in the past, and it is beneath Tesla’s lofty earnings a number of as nicely.
This means 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 autos 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.
