Tesla's Self-Driving Taxi Launch: Big Ambitions Meet Real-World Challenges

Tesla's Self-Driving Taxi Launch: Big Ambitions Meet Real-World ChallengesOn Thursday evening, October 12th, Tesla held a much-anticipated launch event for its self-driving taxi in Hollywood. While Tesla CEO Elon Musk delivered his signature hype-driven presentation, the event's contents sparked concern among investors and industry experts about the company's future plans

Tesla's Self-Driving Taxi Launch: Big Ambitions Meet Real-World Challenges

On Thursday evening, October 12th, Tesla held a much-anticipated launch event for its self-driving taxi in Hollywood. While Tesla CEO Elon Musk delivered his signature hype-driven presentation, the event's contents sparked concern among investors and industry experts about the company's future plans.

Musk arrived in a sleek, silver, two-door Cybercab prototype and took it for a spin around a mock street meticulously designed at Warner Bros. Studios. He then pledged that by next year, Tesla's popular Model 3 and Model Y vehicles would be capable of self-driving without human supervision in California and Texas. Musk also revealed that Tesla plans to begin mass production of the fully autonomous Cybercab, priced below $30,000, around 2026. He also showcased a 20-passenger self-driving Robovan designed to shuttle people between towns, claiming it would revolutionize cities by "turning parking lots into parks."

Beyond vehicles, Musk displayed a dancing humanoid robot and stated that Tesla would eventually sell these robots for $20,000 to $30,000 each. He declared, "I believe this will be the greatest product ever."

However, the lack of concrete details in the presentation raised concerns among investors and industry experts. They sought more information about how Tesla would successfully transition from an automotive manufacturer to a self-driving and AI giant with a solid business foundation. Tesla's stock price dropped by 8.78% on Friday, continuing its downward trend since hitting an all-time high at the end of 2021. The market worries that more affordable electric car competitors could steal market share.

Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management and a Tesla shareholder, remarked, "Musk has a vision, but someone needs to execute that vision. Tesla's number one priority for the next 24 months is selling electric vehicles. Why aren't we focused on that?" Gerber expressed optimism about products like the Cybercab and Robovan, but also desired to see a more traditional, budget-friendly mass-market vehicle released by Tesla in the near future.

For years, Musk has promised a $25,000 starting price for a car, a promise investors view as crucial for attracting new customers. However, news in April that Tesla scrapped this project caused a drop in Tesla's stock price.

Meanwhile, ride-sharing companies Uber and Lyft saw their stock prices surge by about 9% and 10%, respectively. Analysts pointed to Tesla's lack of specifics in the self-driving taxi space as partially alleviating concerns about competitive pressure from the company.

Tesla aims to surpass existing self-driving car manufacturers, including Alphabet's Waymo. By pursuing a low-cost technology approach, Musk believes Tesla can scale up self-driving vehicles faster than competitors. Tesla's strategy is simpler and less expensive than its rivals' but also presents "key weaknesses." The most notable concern is that its AI-powered system lacks the ability to pinpoint the cause of accidents or other malfunctions, a potential issue that could attract regulatory scrutiny.

Matthew Wansley, a professor at Cardozo Law School in New York, stated, "Tesla's software is at least several years behind Waymo, and that's the crux of it. There's no cool car design that can paper over that fact." Bryant Walker Smith, a professor at the University of South Carolina School of Law, similarly commented, "Tesla is once again claiming to be a year or two away from true self-driving, a claim they have been making for the last decade."

The entire event had a distinct 2014 vibe, except back then there weren't any autonomous vehicles actually operating on public roads. Today, there are self-driving cars carrying real people on real roads, but none of them are Tesla's. The Tesla launch didn't change this fact and made this irony even more evident.

KCBoyce, vice president of Escalent, an electric vehicle industry data analysis and consulting firm, commented, "Given Teslas history of overpromising and underdelivering, my expectations for this event were low. In that sense, it delivered on my expectations: a typical Tesla announcement filled with hype and light on details."

Tesla's competitors employ similar AI and camera technology but have implemented so-called redundancy systems and more expensive sensors to ensure safety. Ramesh Poola, co-chief investment officer at CreativePlanning, a firm that holds Tesla stock, admitted that Musk's speech was impressive but indicated that "theres no question that were hungry for more details, such as what Musks specific plans are going forward and how he plans to turn this new AI and robotics into actual revenue."

Poola expects regulators to be a "major hurdle" for Musks plan to launch unsupervised self-driving cars next year. He pointed out that Teslas current "Full Self-Driving" (FSD) assistance features, which lack continuous human driver attention, are not safe for unsupervised operation.

Poola added, "The prototypes that Musk showed are certainly exciting," but admitted that widespread adoption of autonomous ride-hailing "is probably still three to four years out" with passengers ordering rides through an Uber-esque app. Poola sees this as a positive thing and advises clients against dumping Tesla stock. He explained, "This technology has many monetization avenues. The Cybercab might not be here next year, but over the long term, it's a real thing."

Musk has envisioned a fleet of self-driving Teslas that passengers could hail through an app. However, he didn't mention this app at Thursday's event. Tasha Keeney, director of investment research at Tesla shareholder ARK Investment Management, expressed her desire to learn more about the app. Still, Keeney said she was encouraged by Musk's plans to launch an unsupervised version of Full Self-Driving in Texas and California next year. She remarked, "If they can pull this off, I don't see any reason why they cant launch a robotaxi service quickly."

Overall, Tesla's self-driving taxi launch was brimming with ambition but also faced real-world challenges. Musk presented his vision for the future, but the event's lack of concrete details sparked concerns among investors and industry experts. Whether Tesla can successfully transition into a self-driving and AI giant will require time and action to prove.