Morgan Stanley: Robotaxi market to hit $1 trillion by 2040
Synopsis
Morgan Stanley forecasts the global robotaxi market will reach $1 trillion by 2040, calling China's collapsing manufacturing costs — parts expected to drop to $35,000–$40,000 per vehicle by 2027 — a 'major underappreciated accelerant' that could make the sector operationally profitable by 2028.
Key Takeaways
The global robotaxi market is forecast by Morgan Stanley to reach US$1 trillion by 2040 .
Chinese robotaxi component costs are expected to fall to US$35,000–US$40,000 per vehicle by 2027 , according to the bank's research note.
Robotaxi services are projected to cover vehicle operating costs by 2028 , enabling scaled commercial operations by 2030 .
Baidu , Xpeng , and WeRide are identified as regional front-runners, alongside global leaders Tesla and Waymo .
Morgan Stanley flagged Europe and broader Asia — including Germany , France , and South Korea — as markets that may gain importance by mid-decade.
Morgan Stanley projects the global robotaxi sector will grow into a US$1 trillion market by 2040, with China-based companies Baidu, Xpeng, and WeRide positioned as regional front-runners alongside global leaders Tesla and Waymo. The US investment bank's research note, published on Friday, July 4, 2026, identifies plummeting Chinese manufacturing costs as a critical and widely underestimated catalyst for the industry's expansion.
China's cost advantage: a structural accelerant
According to the bank's forecast, the cost of parts per vehicle for Chinese-made robotaxi solutions is expected to fall to between US$35,000 and US$40,000 by 2027. Morgan Stanley described falling manufacturing costs in China as a "major underappreciated accelerant" for the global industry, driven by the country's leaner and more competitive supply chains.
This hardware cost compression, combined with rapid advances in artificial intelligence and increasingly clear regulatory frameworks, is expected to allow robotaxi services to cover their vehicle operating costs by 2028. The bank sees this as the foundation for scaled commercial operations by 2030.
Why it matters
The trillion-dollar projection signals a fundamental shift in how autonomous mobility could be commercialised at scale. Lower barriers to mass adoption — enabled by cheaper components — mean that profitability timelines for robotaxi operators could compress significantly faster than previously modelled.
Chinese players are reportedly leveraging distinct structural advantages, including tighter integration with domestic supply chains and government-backed regulatory clarity, giving them a competitive edge in scaling deployments regionally before expanding globally.
The competitive backdrop
While the US and China currently dominate the autonomous vehicle landscape, Morgan Stanley noted that "Europe and broader Asia may emerge with increasing importance by mid-decade." Markets such as Germany, France, and South Korea are among those flagged as potential growth zones as regulatory environments evolve.
Beyond the leading trio of Baidu, Xpeng, and WeRide, other players including Pony.ai and DiDi Global are active in the space, intensifying competition across both technology development and commercial licensing.
What's next
The 2028 operating-cost-coverage milestone will be the first major inflection point to watch — it determines whether the sector attracts the institutional capital needed to fund the fleet expansion required for 2030 commercial scale. Regulatory progress in Europe and secondary Asian markets will be equally decisive in determining which companies capture market share outside their home regions.
Point of View
000 by 2027 — mirrors the pattern seen in Chinese EV manufacturing, where aggressive vertical integration repeatedly blindsided incumbents. What mainstream coverage tends to underweight is the regulatory asymmetry: Chinese cities have moved faster to designate commercial robotaxi zones, giving domestic operators real-world data advantages that compound over time. If the 2028 operating-cost-coverage milestone holds, the capital formation cycle for fleet scaling will begin well before Western regulators have finished debating liability frameworks — a structural lead that is very difficult to reverse.
NationPress
6 Jul 2026
Frequently Asked Questions
What is Morgan Stanley's robotaxi market forecast?
Morgan Stanley forecasts the global robotaxi market will reach US$1 trillion by 2040. The bank's research note, published in July 2026, identifies falling Chinese manufacturing costs and AI advances as the primary drivers of this growth trajectory.
Which companies are leading the robotaxi race according to Morgan Stanley?
Morgan Stanley identified Tesla and Waymo as global leaders, with Baidu, Xpeng, and WeRide positioned as regional front-runners in China. Other active players in the space include Pony.ai and DiDi Global.
How much will Chinese robotaxi parts cost by 2027?
According to Morgan Stanley's forecast, the cost of parts per vehicle for Chinese-made robotaxi solutions is expected to drop to between US$35,000 and US$40,000 by 2027. The bank described this cost compression as a 'major underappreciated accelerant' for the global industry.
When will robotaxi services become commercially viable?
Morgan Stanley expects robotaxi services to cover vehicle operating costs by 2028, setting the stage for scaled commercial operations by 2030. This timeline is underpinned by lower hardware costs, AI progress, and clearer regulatory frameworks.
Which regions outside the US and China could become important robotaxi markets?
Morgan Stanley noted that Europe and broader Asia may emerge with increasing importance by mid-decade. Markets including Germany, France, and South Korea are among those considered potential growth zones as local regulations evolve.
