May 1, 2024
📰 FEATURE STORY
Will Tesla’s Robotaxi idea pay off?
By now, it’s obvious that the present looks different from The Jetsons cartoon with robot helpers and flying cars. But could this become a reality in the future? Of all the companies in the world that are constantly looking to innovate for the future, Tesla seems to be betting big on a lot of things, like automated driving.
Why not take it further and have a fleet of self-driving taxis? That’s exactly what Tesla’s Robotaxi idea is aiming to do. CEO Elon Musk has described it as “some combination of Airbnb and Uber”. The company isn’t in the best shape now, but could this Robotaxi idea be exactly what the doctor ordered?
Context
Tesla is still quite popular among the diehards despite all of Musk’s antics with his other company, X (previously Twitter). It has been a few weeks of bad news for the Electric Vehicle (EV) manufacturer. The company missed its revenue target for the first quarter of 2024, there was a sharp decline in profits, and it had to recall thousands of its $100,000 Cybertrucks to fix faulty accelerators.
Musk was supposed to visit India to discuss plans for the company’s entry but postponed due to “very heavy Tesla obligations”. The quarterly results announcement was important since investors were clamouring for information and clarity on the company’s challenges over the past few quarters. This includes competition from Chinese manufacturers, lower-than-expected sales, and uncertainty about the company’s future car pipeline of affordable cars.
Those issues resulted in revenues dropping 9% in the March quarter – the first decline in over four years. It has about 28 days of inventory of its existing models. There’s lower demand, which caused the company to lay off 2,600 employees at its Texas factory.
While some thought the company had given up on launching affordable models, it seems it hasn’t. But that will seemingly come at a cost. To accelerate the production of these new models, the company will cut back on its new manufacturing technology – the unboxed method, where parts will be assembled simultaneously in different parts of a factory.
Another plan Musk has been hinting about for years is called Robotaxi. The idea is to have a fully self-driving car with no steering wheel or pedals for an autonomous taxi service. Owners could make money by renting their Teslas when they aren’t being used. It’s expected to be unveiled in a few months.
The company provided a sneak peek at this idea through its app. It showed five screens, with the first having a big button called “Summon” and a lower message for possible wait time. The next screen had a 3D map with a small virtual vehicle following a route to the passenger. It has been described as something similar to other ride-hailing apps. Some cars will be Tesla’s, and others will belong to consumers.
While this idea has been long gestating, Musk seems to think this is what the company needs as it deals with several challenges. Will it pay off?
VIEW: Could be a game changer
What this Robotaxi idea means is exactly what Musk has said in the past – Tesla is a technology company. With softening EV demand and sales, the company needs to look at alternatives to increase revenue. Cutting prices of its existing models isn’t something the company will likely do. The other option is to focus more on the potential value of its self-driving software and the Robotaxi business.
The company has already spent a lot of money on self-driving technology. Combine it with a ride-hailing business, and it could help Tesla strike gold. People are already very familiar with how apps like Uber work. In the case of Robotaxi, actual Tesla consumers can opt-in, allowing them to earn some money. It could also give Tesla owners the choice to let their cars be used only by friends, family, or five-star users.
When Musk talks about this idea, he mentions end-to-end neural networks trained on billions of miles of real-world data. It goes back to the assertion that Tesla is a technology company. For investors, it’s some news to hang on to as the company enters a new phase. It’s still a very popular brand among EV enthusiasts. This Robotaxi idea might enhance that.
COUNTERVIEW: It’s not what Tesla needs
The Robotaxi idea is a very risky bet. It’s a risk on top of everything the company is going through now. Betting on vehicles that drive themselves as taxis faces technological and engineering hurdles. Not to mention the regulatory and legal headaches that could come with it. Claims about self-driving and autopilot technology from different car manufacturers are now under increased government scrutiny.
In general, the development of autonomous vehicles hasn’t been smooth. One autonomous driving software company, Ghost Autonomy, closed its worldwide operations since it didn’t see a viable, profitable path. Last year, General Motors’ Cruise autonomous unit faced regulatory scrutiny after one of its vehicles hit and dragged a pedestrian. There needs to be a year or two with no incident or controversy involving self-driving technology. That hasn’t happened yet.
Tesla prioritising the Robotaxi business over an affordable model doesn’t seem wise. The company promised all its cars would be automated years ago. Even with changes in that thinking, we’re still years away from that reality. Musk has been talking about this Robotaxi idea since 2019, but there has been very little movement on it. The concept of fully automated cars seems very far away, and perhaps it’ll only remain as a concept.
Reference Links:
- Tesla sees biggest revenue drop since 2012 but company shares still surge – The Guardian
- A cheaper Tesla is back on the menu – The Verge
- Tesla Promises ‘More Affordable Models’ and a ‘Cybercab’ – Wired
- Tesla teases robotaxi ridehailing function in its app – The Verge
- Robotaxis are not the solution to Tesla’s problems – Financial Times
- Elon Musk’s Tesla Bait-and-Switch Is Getting Old – Bloomberg
- Tesla’s bet on robotaxis is a long way from paying off – Reuters
What is your opinion on this?
(Only subscribers can participate in polls)
a) Tesla’s Robotaxi idea could pay off.
b) Tesla’s Robotaxi idea won’t pay off.
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