Will the Tesla Robotaxi Scheme Work?

Elon Musk is hell bent on putting a Tesla robotaxi on the streets sometime this year. In fact, Musk claims Tesla Motors (NASDAQ: TSLA) could launch a robotaxi rideshare network later this year.

Musk has so much faith in the Tesla robotaxi that he discussed it at a Tesla company event in April. In fact, The Startup’s Hans van de Bruggen thinks Tesla plans to put one million robotaxis on the road this year.

Last year, Musk bragged that a Tesla robotaxi owner could make $30,000 a year from the vehicle, USA Today observes. In detail, Musk claims his fans could earn $30,000 a year by selling rides in the family car through the Tesla ridesharing app.

Will Tesla’s Robotaxis make money?

There are a few obvious problems with Musk’s robotaxi scheme that Tesla faithful; such as van de Bruggen, ignore. The obstacle’s to Musk’s robotaxi dream include:

First, Tesla has no experience in rideshare. Tesla is a successful manufacturer, but it has no experience marketing or delivering a service such as rideshare.

Yes, Tesla has gathered enormous amounts of data about vehicles. However, I consider Waymo, Tesla’s most impressive competitor in autonomous vehicles, the Alphabet (NASDAQ: GOOG) subsidiary is gathering similar amounts of data. Moreover, Waymo is operating a rideshare service; Waymo One and gathering data about how real riders use its services.

Second, Tesla could lack the capability to manufacture one million robotaxis. Notably, Tesla has just three factories in the United States. One of those factories, the main plant in Freemont, California, is at full capacity now. Another, the Giga Factory 1, in Story County, Nevada, is half finished, and the Giga Factory 2 in Buffalo, New York, manufactures solar panels and batteries, not vehicles.

Rideshare Loses Money

Third, the two publicly-traded rideshare companies in America, Uber (NYSE: UBER) and Lyft (NASDAQ: LYFT) lose money. For example, Uber reported a quarterly operating loss of -$1.263 billion on 31 March 2020. In addition, Uber reported a quarterly operating loss of -$2.936 billon on the same day

Similarly, Lyft reported a quarterly operating loss of -$434 million and quarterly common net loss of -$398.07 million on the same day. Thus, rideshare is a money-losing business and Musk wants to enter it.  

However, Tesla (NASDAQ: TSLA) itself makes money. For instance, Tesla reported a quarterly operating income of $283 million on 31 March 2020. On the other hand, Tesla reported an operating loss of -$167.46 million on 30 June 2020.

Thus, Musk has a history of making money from formerly money losing businesses. However, Musk is willing to lose colossal amounts of money to finance future schemes. Tesla, for instance, lost money for years.

Thus, I think a smart move for Tesla could be to buy Lyft or Uber or form an alliance with them. Yet, I see no evidence Musk is planning such an alliance or acquisition.

Will Politics Kill Tesla’s Robotaxis?

Fourth, I think Musk and his fans underestimate the threat politics and popular sentiment could pose to robotaxis.

The only political threat to robotaxis van de Bruggen mentions is regulation. However, I think popular opposition is a greater menace to autonomous rideshare.

For instance, mobs with sledgehammers or guns could attack and destroy robotaxis. In addition, activists could stand in front of autonomous taxis, lie down in front of them, lie on taxis, or sit on taxis.

The George Floyd protests and riots show civil disobedience and threat of mob violence work. For example, large corporations are adopting the slogan “Black Lives Matter” and even censoring content such as Gone with the Wind to appease the mob.

I predict technology opponents will adopt such tactics. How is the autonomous Tesla supposed to make money burning in the street?

Moreover, politicians will use the violence as an excuse to ban robotaxis.

Are Tesla Robotaxis realistic?

Fifth, I do not think they designed Tesla’s current lineup of vehicles for robotaxi use. In particular, Tesla does not make a minivan.

Look around the average American city, most modern cabs are minivans because they are easy to load and haul several passengers. If Musk is serious about robotaxis, he needs a Tesla minivan, a Model V now.

Importantly, Tesla’s archival in autonomous vehicles; Waymo has autonomous Fiat Chrysler (NYSE: FCAU) rideshare minivans on the road. In particular, the Waymo One rideshare service uses Chrysler Pacifica minivans.

To be fair, I think the Tesla Model S, the Tesla Model 3, the Model X, and the Model Y are all good basic passenger vehicles. However, none of those vehicles offers the easy loading and freight hauling capacity of a minivan.

Conversely, Tesla could begin production of a minivan fast. To elaborate, Tesla could build a minivan on the Model Y, or Model 3 drivetrains.

Is Musk Serious about Robotaxis?

Hence, I have to wonder if Musk is serious about robotaxis. I suspect Musk could be brainstorming about a future business.

Remember, Musk’s on and off again love affair with the Hyperloop. I think robotaxis could be another Musk pipedream.

In conclusion, I think robotaxis, or autonomous rideshare, will be a gigantic business someday. However, I think profitable robotaxis are still several years away.

I suspect Tesla fans will wait for their robotaxis for a long time. My prediction is that the Waymo Chrysler Pacifica minivan will be in your neighborhood long before the Tesla robotaxi.