Tesla – More of Same

Robotaxis could be a near-fatal disease.

• Tesla has rallied on a fantasy that I think will never come true even if FSD eventually works but reality has once again decided to intervene as there is yet another delay further denting Tesla’s already battered credibility in robotaxis.
• In April 2024, Tesla promised that it would unveil its long-awaited robotaxi in August which is a line of business without which Mr Musk has implied that the shares are worth $0 (see here).
• At the same time, Mr Musk doubled down on autonomous driving stating that investors should not own Tesla shares unless they believed that Tesla would “solve autonomy”.
• However, Tesla has now delayed the launch of its robotaxi offering until October to give the design team more time to rework certain parts of the prototype vehicle.
• I continue to think that Tesla is an also-ran in autonomy (which is just one reason why I don’t own the shares) because when one looks at the available evidence, most of it suggests that Tesla is continuing to struggle with this proposition.
• Furthermore, the assumptions that Tesla has made about the economics are deeply flawed meaning that the expectations that it has set around how much money it is going to make are grossly inflated.
  • First, Technology: where Tesla’s decision not to rely only on cameras looks like an own goal.
  • While Mr Musk is correct in his view that a vehicle should be able to drive just by using cameras, he is assuming that the computer that interprets the pictures will be just as good as the human brain.
  • This is where this view falls to pieces as unlike humans, the machine learning system that perceives the environment cannot adapt to situations that it has not encountered before.
  • Almost everyone else deals with this problem by using lidar and other sensors which when combined with cameras can greatly reduce the error rate.
  • This is one reason why I think that many of the other players such as Waymo, Cruise, Nuro, Pony, Baidu, Mobileye, Yandex and a number of other Chinese players are better at autonomous driving than Tesla.
  • Consequently, I rate Tesla as second rate at autonomous driving in the best instance meaning that it is not going to be the first to market which is why its economic assumptions are completely wrong.
  • Second, robotaxis economics: Not being first will also ensure that Tesla’s overly ambitious expectations for robotaxi economics will fall far short of the mark.
  • Tesla correctly (in my opinion) expects that the cost to provide a robotaxi will be around $0.30 per mile but incorrectly thinks that the price will be $1 per mile.
  • This is how it thinks that it will be hugely profitable in robotaxis and is where its long-term growth expectations come from.
  • However, I think that robotaxis, like food delivery and ride-hailing, will be a commoditised hotbed of brutal competition because everyone will be addressing this market and Tesla will not have the market to itself.
  • This means that the $1 per mile price will rapidly collapse to something more like $0.4 per mile or less meaning that this will descend into a fight to the death where only the biggest and most efficient survive.
• Consequently, I think that the market’s view of Tesla’s robotaxi business is far too optimistic and that instead of being the panacea that cures all of Tesla’s ills, it could be a near-fatal disease.
• Hence, I still think that Tesla’s valuation is far above where it should be given the business that it has and its outlook and I continue to avoid the shares.
• There are much better places to look for investing in electrification and autonomous driving like nuclear power and overly sold lidar companies where I have a position in Ouster.