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Investing.com -- A potential partnership between Toyota (NYSE:TM) and Waymo could be a turning point in the race for autonomous driving technology and poses a serious challenge to Tesla (NASDAQ:TSLA)’s dominance, as per Morgan Stanley (NYSE:MS).
Waymo, the self-driving unit of Google (NASDAQ:GOOGL), was early talks with Toyota to explore cooperation on autonomous tech for personally owned vehicles.
Morgan Stanley analysts called the development a “major milestone” that could reshape the competitive landscape.
"Having the world’s largest auto company join forces with the world’s largest robotaxi firm backed by the world’s largest search engine company is a formidable combination," the analysts wrote.
Tesla currently operates the world’s largest fleet of software-defined vehicles, estimated at around 8 million.
Advances in AI, especially vision-language-action models, have heightened the need for real-world driving data.
Waymo’s access to Toyota vehicles could significantly boost its ability to gather and train on that data, creating what Morgan Stanley called a “race for photons.”
It could create a ripple effect for other players, including Mobileye, as the advanced driver-assistance systems market becomes increasingly crowded, especially with Chinese automakers offering more high-end features as standard.
Morgan Stanley sees broader industry implications, from possible OEM tie-ups with Waymo to a shift in how carmakers approach autonomy.
Tesla, which has been edging away from traditional car models, may face more pressure to license its Full Self-Driving software or form partnerships, the analysts said.
The firm also noted that Waymo’s non-competitive stance with automakers, unlike Tesla, may help it win more OEM deals over time.