Tesla’s robotaxi day is scheduled for October 10.
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Investor expectations are high heading into Tesla’s big robotaxi reveal.Investors are looking for details about operations and safety.They also want to know how much this is all going to cost.
The stakes are high heading into Tesla’s October 10 robotaxi day.
The event, originally scheduled for August, is where CEO Elon Musk has promised to release a final design and more detailed plans for Tesla’s Uber-like self-driving car service.
Investors are anxious to hear more about this arm of the business, which Musk has long lauded as Tesla’s true value-generator, as the electric car company struggles in a more competitive EV market.
Musk first teased the robotaxi day event in April, after delivering disappointing first-quarter earnings that have kept Tesla’s stock price muted amid wider market gains.
In typical form, Musk’s promise that the robotaxi business was taking shape offset a major earnings miss and juiced Tesla’s languishing stock price.
“I’ll go back to something I said several years ago: that in the future, gasoline cars that are not autonomous will be like riding a horse and using a flip phone,” Musk said on the April call with analysts. “We continue to make the necessary investments that will drive growth and profits for Tesla in the future.”
Now, he’ll have to back up this promise with tangible results, an area in which his record is spotty.
Over the years, he has bolstered investor and customer excitement with broken promises like fully self-driving Teslas by the end of 2017, The Boring Company’s Hyperloop project, and new vehicles that show up years after he initially promised.
But there are still plenty of unknowns, some of which are pretty important to a potential investor.
1. Who’s in charge of all the cars?
Musk’s plan to allow Tesla drivers to rent out their cars for self-driven rides, “like Airbnb,” may not be as simple as he has laid out, UBS analyst Joseph Spak wrote in a recent note to clients.
“Is an individual really ready to let the Model Y they spent ~$45k on be used by strangers?” Spak wrote. We believe human behavior may be difficult to overcome. Additionally, who is responsible for maintenance, cleaning and recharging? Where does the insurance responsibility lie?”
Musk has said that Tesla would operate a fleet of its own if owner rentals don’t pan out, but Spak warned that this road is much more capital-intensive.
The most recent attempt at Tesla fleet management did not go well. Rental-car giant Hertz sold off its fleet of Teslas earlier this year, citing high repair costs.
2. How safe is FSD?
In the same note, Spak raises questions about Tesla Full Self Driving (FSD)’s rate of improvement compared to competitors like Waymo.
Based on UBS’s estimates Tesla’s FSD v12.5 disengages every 180-200 miles, or every 100-120 miles on city roads. Tesla doesn’t currently release its own disengagement data, and Spak said that will be important in guaging the readiness o a robotaxi service.
To meet the standards Waymo set for the California DMV’s AV program, with disengagement every 84,923 miles, Spak pointed out that Tesla would need a roughly 770-time rate of improvement from current city street performance, Spak estimates.
Safety was also at the top of Morgan Stanley analyst Adam Jonas’s concerns heading into robotaxi day.
“Will investors see data comparing the safety of Tesla’s AV vehicle technology to human driving?” Jonas wrote in a note last week.
Trust in Tesla’s FSD is already mired by a massive recall earlier this year, and its predecessor, Autopilot, has been linked to several accidents over the years.
3. How much will all of this cost?
The biggest elephant in the room on Oct. 10 will be the size and cost of Tesla’s future AI investments.
There is already a capital “arms race” in the self-driving car segment, Jonas wrote, estimating the resources require “require heavy investment, potentially measured in the tens (possibly hundreds) of billions of $ of investment over time.”
Spak expects Musk to talk about the total addressable market for his robotaxi business which would offset these costs, but warns those numbers should be taken with a grain of salt.
With all this in mind, Jonas is unsure that Musk can live up to investors’ high expectations on Oct. 10, he wrote in his note to clients previewing the event.
Aside from getting a demonstration of the latest version of FSD, and perhaps a ride in the Gen 1 Cybercab that has been spotted in Los Angeles, the Morgan Stanley analyst is eager to hear more about Tesla’s plans for AI improvements and execution.
“Tesla’s future valuation is highly dependent on its ability to develop, manufacture, and commercialize autonomous technologies,” Jonas wrote.
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