According to analysts from Morgan Stanley, Google’s autonomous car unit Waymo could be worth more than car giants such as Ford and General Motors. In a note to clients the analysts said that Waymo’s value stood at $70 billion.

The valuation comes after the self-driving car unit of Google entered into a partnership with Lyft, the second largest ride-hailing service in the United States, with a view to launching a driverless car pilot program. The investment bank saw that as a sign that Waymo was in advanced stages of the driverless car revolution. According to the analysts Waymo stood to benefit from revenues that would amount to approximately $1.25 per mile from the partnership.

Fleet of three million

The analysts based their $70 billion valuation on a scenario where the driverless software and hardware from Waymo was used in around 1% of the vehicle miles travelled around the world. To reach that figure Waymo would need to establish a fleet of around three million autonomous vehicles with each one racking around 65,000 miles per year in the next 13 years. That figure would add around 12% to Alphabet’s current enterprise value.

Since Waymo is currently under a Google incubator program known as Google X, the rapid progress it has made in the self-driving space makes it a strong candidate for a spin off in the near future.

“Our Internet team argues Waymo is a potential spin-out candidate that could be worth $70 billion, competing for talent and capital vs. Tesla,” wrote Adam Jonas a Morgan Stanley analyst.

Legal and regulatory risk

Besides the rapid progress and its valuation opportunity other factors that make it a viable candidate for a spin off include the fact Google might not want direct exposure to the legal and regulatory risk that Waymo is likely to face in the future.

At the moment Waymo is using minivans provided by Fiat Chrysler to conduct tests in Austin, Texas; Portland, Oregon; Seattle, Washington and Silicon Valley, California. The driverless car firm has managed to rack up over 3 million miles so far on the road and billions of miles in simulated mode.

In April Waymo revealed that it was conducting a large-scale public testing of it autonomous cars in Phoenix, Arizona. Waymo is also involved in discussions with Honda aimed at collaborating on driverless car technology. Google’s self-driving car unit is also in a legal battle with Uber over allegations that an ex-employee of Google who now works for the ride-hailing firm stole trade secrets from his previous employer.