Tesla Teases a Custom Robotaxi, Are They Crazy?

During the opening of the Gigafactory and during yesterday’s earnings call, Elon Musk mocked Tesla

work on a vehicle that will be dedicated to the robotaxi service. This isn’t the first time Tesla has talked about robotaxis, but it’s a detour from past plans and contrasts the plans of other companies. Several companies have announced dedicated robotaxi plans, including Zoox and Cruise with Waymo and MobilEye in partnership with Geely, but for Tesla it actually gives a really huge advantage found in their earlier plan that few, if any, companies could replicate.

Musk said

“There’s going to be a dedicated robotaxi that’s going to look pretty futuristic.”

“We’re also working on a new vehicle that I hinted at when Giga Texas opened, which is a dedicated robotaxi. It’s going to be highly optimized for autonomy – meaning it won’t have a steering wheel nor pedals.There are a number of other innovations around it that I find quite exciting, but it is fundamentally optimized to achieve the lowest cost per mile or km taking everything into account.

Earlier, Tesla made two statements about the robotaxi offering. Initially, they said that once they achieved “fully self-driving” (not to be confused with their current offering of that name), they would create a “Tesla Network” taxi service that would use both Tesla-owned vehicles and customer cars. customers ready to rent their car 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.

The non-lease plan

They also described a plan that was one of their cleverest. Tesla said it would simply take existing Tesla cars that are no longer leased and quickly convert them to be part of the robotaxi fleet. The conversion would be simple on something like the Model 3 – just remove the pedals and wheel and insert a nice plate where the wheel used to be, along with a few other minor changes. Due to the minimalist design of Tesla cars, this change would be simple and the result quite uncluttered. Since Tesla believes all of their cars already have the hardware to drive autonomously, the change would be minimal.

The major advantage is that a rental customer has used around 40% of the depreciation of the vehicle, taking advantage of it when it was new. No one cares if their taxi is 3 years old, so that’s perfectly good for that market. This means they can operate a fleet of robotaxi at only 60% of the cost of the vehicle compared to anyone trying to build a dedicated robotaxi who has to buy the vehicles brand new. Vehicle cost is still the largest component of cost (especially with EVs), so that’s a big win.

The genius was that it’s very difficult for someone else to do this. You can’t just easily convert random used cars into robotaxis to achieve this. It’s only easy if you are the car manufacturer and you designed the car for this conversion. Also, if you find your fleet is too big, you can convert the units into used cars and resell them. This means you can get bank financing to buy your vehicles as banks are quite comfortable with financing traditional cars.

Compare that with the custom vehicles built by Zoox and Cruise and Geely. Although they get many benefits from being customized – Zoox’s whole raison d’etre is these benefits – they have to build new vehicles with whatever it costs. Car buyers care a lot about buying a new car, but taxi drivers don’t care at all. This bounty is discarded. Additionally, Custom Vehicles cannot be sold for any other purpose. This makes it much more difficult to use debt financing to build the fleet, because if the company fails, the vehicles can simply be scrapped. A big burden for new robotaxi companies is securing the capital to buy fleets of 10,000 robotaxis to service a new city. Companies like Alphabet, GM and Amazon

have this capital, but not everyone.

Of course, for Tesla, the big catch is that they don’t have full self-driving yet, and despite Elon Musk’s constant “any day now” predictions, they don’t have it. may not soon, or ever, at least with existing hardware. So they might not be able to implement this plan as written. On the other hand, they retain the possibility of changing the sensors on a non-leased car, or even (gasp) of adding a LIDAR

, if necessary. It’s expensive but still much cheaper than building a new car from scratch, but since they use a glass roof, they didn’t design the vehicle to easily install sensors on it.

You can retrofit other cars, but unless the dashboard is completely removed, they won’t have the sleek robotaxi look that a Tesla would have. Tesla’s all-software design is well suited for this.

Custom Tesla Robotaxi

Now Elon Musk says they could give up all those perks to build a custom robotaxi. They might do it for the same reason Zoox and Cruise want – things like face-to-face seating, large sliding doors, easy access, 4-wheel steering, easier cleaning and more. It may be another “Robezium” design like the Cruise Origin and the Zoox (a roughly symmetrical box with a roughly trapezoidal 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 it might even be an admission that they can’t actually turn old Teslas into robotaxis, lest pure camera-based FSD won’t happen. They don’t like to admit that possibility, though.

Custom robotaxis will be a thing in the future, that’s for sure. Once the world really embraces robotaxi travel, people will start insisting on a vehicle that doesn’t compromise on that vision. But that’s not what the world will insist on on day one. On day one, they’ll be happy riding in a regular vehicle like a Tesla Model 3 without wheels. They’ll be a bit bothered by the fact that sedans are harder to get in and out of and that you can’t sit face to face with people. Eventually, the robotaxis designed to do this better will win out. Ultimately. In fact, while the low headroom is necessary for extreme aerodynamic efficiency, it’s not difficult to design it so that the front seats can be reversed when converting to get that face-to-face social taxi.

A cheap capsule?

Elon Musk boasts of low-cost operation, less than the cost of a bus ticket. It is doable, although my own predictions have involved very low cost vehicles, and in particular 1-2 person vehicles. It is possible that this is what we are talking about, a “pod” for 1-2 people. Such vehicles can be very cheap to manufacture, even new – well under $10,000, and intended for low-speed urban use. A $10,000 electric vehicle can be very cheap to run. In my article on the economics of the robotaxi, I include a spreadsheet that suggests a small vehicle robotaxi service could cost less than 30 cents/mile. This will go 8 miles for less than the price of a subsidized bus ticket, and around 20 miles for the price of an unsubsidized ticket. (Disclosure: I am an investor/advisor in Nimbus, a company building the first such manually-driven vehicles with a selling price target of less than $8,000.)

It is a little more difficult, but not impossible, to compete with the bus in a city vehicle for 4 people. Few companies sell urban vehicles at low prices only, because customers only like to buy cars that can drive them everywhere – but they are ideal for city dwellers and for taxi services.

As usual, Tesla continues to surprise – their earnings certainly have – and it’s in a good position to do well in this space if it can build a full self-driving system. Unfortunately, their current system is in a sorry state compared to other companies and awaits major breakthroughs. However, if they need it and are willing to crow-eat their enormous resources give them the opportunity to acquire a startup that has managed to build a stack of work to suit their needs, so they are a force to be feared. . They have shown that they are good at making cars and they will only get better. The robotaxi activity requires both self-driving software and a physical vehicle. Doing both offers certain advantages.

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