At the Gigafactory opening and yesterday’s conference call, Elon Musk teased Tesla
“There will be a dedicated robotaxi that will look quite futuristic.”
“We are also working on a new vehicle that I mentioned at the inauguration of the Giga Texas, which is a dedicated robotaxi. It will be highly optimized for range – meaning it won’t have a steering wheel or pedals. There are a number of other innovations around it that I find quite exciting, but it is fundamentally optimized to achieve the lowest fully considered cost per mile or km when counting it all.”
Earlier, Tesla had made two statements about the robotaxi offering. Initially, they said that once they had achieved “full autonomous driving” (not to be confused with the current offering of that name), they would create a “Tesla Network” taxi service that would make use of Tesla-owned vehicles and cars from customers. of customers willing to rent their cars when not in use. It has been suggested that if you were willing to rent your car it would make you a lot of money – Elon Musk said it would be crazy to buy any other car as a Tesla would make money instead of costing money.
The off-lease plan
They also described a plan that was one of the smartest. Tesla indicated that it would simply take existing Tesla cars that came out of rental and quickly convert them to the robotaxi fleet. The conversion would be simple to something like the Model 3 – just take out the pedals and steering wheel and insert a nice plate where the steering wheel was, plus a few other small changes. Because of the minimalist design of Tesla cars, this change would be simple and the result quite elegant. Since Tesla believes that all of its cars already have the hardware to drive itself, the change would be minimal.
The big advantage there is that a rental customer spent about 40% of the vehicle’s depreciation, taking advantage of it while it was new. Nobody cares if the taxi is 3 years old so it’s perfectly fine for that market. This means that they can operate a robotaxi fleet at only 60% of the cost of the vehicle compared to anyone trying to build a dedicated robotaxi who needs to buy the vehicles new. Vehicle cost is still the biggest component of cost (especially with electric vehicles), so it’s a big win.
The genius was that it’s very difficult for anyone else to do that. You can’t just convert random used cars to robotaxis easily to achieve this. It’s only easy if you’re the car’s OEM and you’ve designed the car for this conversion. Also, if you find your fleet is too large, you can convert the units into used cars and sell them. This means that you can get bank financing to buy your vehicles because banks are totally comfortable with traditional car financing.
Compare that to custom-built vehicles by Zoox and Cruise and Geely. While they gain many advantages from being customized – the whole raison d’être of Zoox is these advantages – they must build new vehicles at all these costs. Car buyers worry a lot about buying a new car, but taxi drivers don’t care at all. That prize is thrown away. Also, custom vehicles cannot be sold for another role. This makes it much more difficult to use debt financing to build the fleet, as if the business fails, the vehicles can be scrapped. A big burden for new robotaxi companies is raising capital to buy fleets of 10,000 robotaxes to service a new city. Companies like Alphabet, GM and Amazon
Of course, for Tesla, the big problem is that they still don’t have full autonomy, and despite Elon Musk’s constant “anyday now” predictions, they may not have it anytime soon, if ever, at least with the existing hardware. Therefore, they may not be able to carry out this plan as written. On the other hand, they keep the option to swap sensors in an off-lease car, even (sigh) adding a LIDAR
You can retrofit other cars, but unless it’s a complete dashboard removal, they won’t have the sleek robotaxi look a Tesla would have. The design of all Tesla software controls is suitable for this.
Tesla custom robotaxi
Now, Elon Musk indicates that they can give up all these advantages to build a custom robotaxi. They can do it for the same reason Zoox and Cruise want it – things like face-to-face seats, large sliding doors, easy access, 4-wheel steering, easier cleaning, and more. It could be another “Robezium” design like the Cruise Origin and Zoox (a roughly symmetrical box with a roughly trapeze shape). It may look like the vehicles teased by “The Boring Company”. It’s hard to see that saving 40% of the cost is worth it.
It’s unlikely, but maybe this is even an admission that they can’t really turn old Teslas into robotaxis, for fear that pure camera-based FSD might not happen. They don’t like to admit that possibility, however.
Custom robotaxis will be a thing in the future for sure. Once the world truly embraces robotaxi travel, people will start to insist on a vehicle without compromising that vision. But that’s not what the world will insist on day one. On day one, they will be happy to ride in a regular vehicle like a Tesla Model 3 without wheels. They’ll be a little annoyed by the fact that sedans are harder to get in and out of, and the fact that you can’t sit face-to-face with people. Eventually, the robotaxis designed to do this better will win. Eventually. In fact, while the low height is necessary for extreme aerodynamic efficiency, it’s not difficult to design it so the front seats can be reversed in conversion to get that face-to-face social taxi.
Low cost pod?
Musk Elon boasts of low-cost operation, less than the cost of a bus ticket. This is doable, although my own predictions involved very low cost vehicles and in particular 1-2 person vehicles. It is possible that this is what is being talked about, a “pod” of 1-2 people. These vehicles can be very cheap to make, even new – well under $10,000 and intended for low-speed urban use. A $10K electric vehicle can be very cheap to operate. In my article on robotaxi savings, I include a spreadsheet that suggests that a robotaxi service for small vehicles can cost less than 30 cents/mile. This will cost you 8 miles for less than the price of a subsidized bus ticket and about 20 miles for the price of an unsubsidized ticket. (Disclosure: I am an investor/consultant in Nimbus, a company that builds manual vehicles of this type with a target sales price below $8,000.)
It is a little more difficult, but not impossible, to compete with the bus in a 4-person urban vehicle. Few companies sell low-cost urban vehicles because customers only like to buy cars that can take them anywhere – but they are great for urban dwellers and for taxi services.
As usual, Tesla continues to surprise – its earnings have certainly surprised – and it is in a good position to do well in this space if it can build a fully functioning, autonomous system. Unfortunately, their current system is in a very dismal state compared to other companies and awaits major breakthroughs. However, if they need and are willing to eat crow, their massive resources give them the option to acquire a startup that has managed to create a pile of work to suit their needs, so they are a force to be reckoned with. They’ve shown that they’re good at making cars and they’re only going to get better. The robotaxi business requires both the autonomous driving software and the physical vehicle. Doing both has some advantages.
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