Will Musk’s Robotaxis make it?

I recently attended Intersolar in Munich, where Tesla’s 200m² booth showcased their new vision: the integration of solar, battery storage, EVs and autonomous tech.

Tesla are small on solar (it’s a low-margin business) but they are big on industrial-scale battery storage, with their 3.9 megawatt-hours Tesla Megapack. And now Elon Musk is about to make the mother-of-all pivots with autonomous driving. Instead of simply adding more driver assistance tech (or ADAS) to his vehicles, he wants to disrupt car ownership. 

EV sales have flattened. (Musk missed a trick by not focusing on last mile deliveries, which will see huge demand given that European cities have banned ICE vans and trucks from 2030.) But he is hoping that by merging three businesses (EVs, battery storage, autonomous tech) into one, it will be worth USD 580 billion (as per some valuations). If you’re wondering how this could be possible, then imagine combining the platform model of AirBnB with the ride-hailing model of Uber. Except you’re not renting out your one-bedroom cottage, you’re renting out your Tesla as a robotaxi. As a Tesla buyer you would have the option of placing your vehicle on the robotaxi platform should you want to put your asset to work.   

Like many of Musk’s other ideas, it’s ingenious, and he knows just how to sell it. Tasha Keeney of ARK Invest (an advisory firm that specializes in disruptive innovation) put out a report saying Tesla shares will skyrocket 1,350% to USD 2,600 by 2029. Robotaxis are key to this bullish prediction. 

I have no doubt that Tesla will crack the tech behind autonomous vehicles. The problem is, so will Cruize, Baidu, VW Moia, WeRide, Wayve, Waymo, Pony AI… and so on. Although autonomous vehicles are technologically challenging, once they work standards will be established and many companies will be doing it. As with ride-based offerings, brand will not mean much, but price and convenience will be everything. For AVs (robotaxis) to succeed, the operator needs a critical mass of vehicles to ensure the service is indeed cheap and convenient. 

Musk hopes to establish incumbency in the new arena of robotaxis, making commissions on the fleet while also making margins on vehicle sales.  

Photo by Patrick Pleul/Getty Images

For now Tesla’s robotaxi play can only work in America, Europe and China; there are not enough Tesla’s or enough charging infrastructure outside of these markets. Here are the challenges in each region:

China offers the biggest potential of the three markets. Musk made the most of his recent visit to China, where Prime Minister Li Qiang gave him permission to operate robotaxis and use Baidu maps. But EVs (and robotaxis in particular) gather sensitive data. I recently spoke to the head of cybersecurity for a large French transport and weapons company in Israel. He explained that Israeli military bases banned conscripts entering the base in certain Chinese EVs as the cameras were taking images and sending them to an unknown server. EVs have eyes on all the time; I doubt that China will allow an American-owned operator to become the dominant robotaxi. In addition, there are many good local companies deploying robotaxis; they will defend their turf.

From the outside Europe seems attractive for robotaxis, with car ownership for urbanites on the wane. But European cities are dedicated to non-vehicle (or reduced vehicle) solutions: i.e. 80% modal share from walking, cycling,and public transport. For European cities Robotaxis are part of the problem, not the solution. In keeping with this ethos, VW Moia has an on-demand, shared shuttle (a solution somewhere between a bus and a robotaxi), which is ideal for public transport authorities to supplement their fleet. With drivers increasingly hard to find, public transport authorities will turn to AVs. In Europe the commitment to public transport will see shared shuttles preferred over robotaxis, with European-based private mobility operators like VW Moia set to benefit. 

Photo by xavierarnau/iStock

In the US, only one in ten new car sales is an EV, of which about half are Teslas. The problem is that they are not evenly distributed and there are not many places in America where there is a sufficient density of Tesla ownership for the service to work. This challenge is not insurmountable if Tesla is able to produce a cheap robotaxi that Americans want to own and pool to other riders, which will take time. But Musk would still face the challenge of dealing with city authorities in such a partisan country. He will need operating licences from transport authorities, who will balance the interests of citizens and existing operators against those of the controversial billionaire. Democrat-run cities (where EV penetration is highest), might follow the European lead in reducing cars and prefer shared shuttles to Tesla robotaxis. 

It is clear that given the safety and utility benefits, sometime in the future almost all vehicles will be autonomous. What is less clear is how their business model is going to work. One thing is for sure, AV manufacturers/operators (including Musk) will have to work with public authorities, i.e. the people who make and enforce the rules around road transportation, and who are incentivized not by profit but by public good. This is not a “winner takes all” equation, something Elon Musk will have to get used to. 

Find out by attending the London AV Mobility Summit on July 3rd–4th at the Smart Mobility Living Lab, where the autonomous vehicle community comes together with public transport authorities and municipalities to shape its crucial future.

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