Speculative Tesla owned Uber-like service impact on Tesla's Mission and Valuation?

[brucet999]

A Tesla-based autonomous Uber-like service has, I think, one fatal flaw to it. A rider wants to go from Rockefeller Center to Wall Street and Nav routes them through Bayonne NJ supercharger.

 

[MichFin]

I really think that the real winner of this is going to be google as they already have autonomous cars and proven they can put that in just about any kind of car. They are years ahead in testing and are going to be the first to market.

Now that being said, they're going to need an electric car that has excellent range and quick charging capability at a reasonable cost. Can you say model 3.

 

[SteveG3]

I really think that the real winner of this is going to be google as they already have autonomous cars and proven they can put that in just about any kind of car. They are years ahead in testing and are going to be the first to market.

Now that being said, they're going to need an electric car that has excellent range and quick charging capability at a reasonable cost. Can you say model 3.

I see what you are saying MichFin. I read most of the Morgan Stanley report last night, and they say Google is looking to have an autonomous fleet on the road by 2017/2018. That said, 1) as Elon has said repeatedly, there's two components to the timeline, executing the technology, AND persuading regulators to allow it on the road. Elon estimates the latter will take 3-5 years IIRC. 2) as you alluded to, the little google buggy we've seen thus far is a different kind of animal than what Tesla builds.

Jonas does offer some helpful ways to look at the potential market, and some good research, but he also has a fundamental premise that, while revealing, he reads too much into in my view, and a massive assumption about consumer behavior that seems far far too large to take for granted (and to me unlikely). I'll have more to say when I finish reading the report.

- - - Updated - - -

A Tesla-based autonomous Uber-like service has, I think, one fatal flaw to it. A rider wants to go from Rockefeller Center to Wall Street and Nav routes them through Bayonne NJ supercharger.

lols, too true today from what I've heard. fwiw, on the earnings call last week, if I understood correctly, Elon was saying that they find current mapping (from everyone, Google, etc) inadequate for autonomous, and so they are going to send out their own effort to record all roads in substantially greater detail.

"The fact of the matter is, there's no publicly available data that is sufficiently accurate for autopilot, as far as navigation data, suite data, it's too coarse. So, it looks like we don't really have much choice but to create our own data set for driving in the long-term in order to provide a high quality product experience. It's just the only way we can think of to do it." -Elon

http://www.thestreet.com/story/13246464/5/tesla-motors-tsla-earnings-report-q2-2015-conference-call-transcript.html

 

[ItsNotAboutTheMoney]

fwiw, on the earnings call last week, if I understood correctly, Elon was saying that they find current mapping (from everyone, Google, etc) inadequate for autonomous, and so they are going to send out their own effort to record all roads in substantially greater detail.

What happened was that Elon Musk was asked about mapping company purchases and whether Tesla were planning to do anything. It led to him saying that it _was clear_ that current mapping wasn't good enough for autonomous so they'd have to do their own.

Didn't say they _are_ doing anything, or when they'd need to do it. A leap to suggest that Tesla's building a Supermap any time soon.

 

[SteveG3]

yes, if my comment was not clear, I agree with ItsNotAboutTheMoney- Elon did not indicate anything about the timing of such an effort.

 

[replicant]

yes, if my comment was not clear, I agree with ItsNotAboutTheMoney- Elon did not indicate anything about the timing of such an effort.

He did say "So, it looks like we don't really have much choice but to create our own data set for driving in order to... uh uh uh in the long-term... uh uh in order to provide a high quality autopilot experience. It's just the only way we can think of to do it"

[video]https://youtu.be/SG9MNWXn9mU?t=23m15s[/video]

 

[Ludus]

Ludus, the crazy compelling returns of doing it alone? That's where we've gotten with this thread. There is a "too good to be true" part though... it's unclear how long Tesla can sustain those kinds of massive profits. Others will catch up with autonomous driving (it's not a lock that Tesla gets there first for that matter). At that point pricing of the service will be impacted by other autonomous vehicle offerings... consumers very likely will be the huge beneficiary here. An autonomous cab ride for a few miles may drop from ~$12, to the couple dollars it costs now to take the bus, or even less. I've suggested upthread a scenario where consumers, large cities (in the form of exclusive licensing fees), and Tesla all come out big winners by splitting the value added by this automation.

In my view, Tesla's capacity to command huge profits will depend on 1) how quickly other manufacturers match them in autonomous technology, 2) how aggressively Tesla's peers supply the market (Google I'd expect to dive in... it's the whole point of their vehicle effort, Daimler, for example, may get there technically but may well be more conservative about rolling out an Uber like business), and 3) how wide the market is. As to point 3), dense urban centers seem like a no brainer, it's a hassle to have and park a car. Areas in between urban and suburban, ? re the interest, suburban sprawl double ?... in these places we are getting into people changing their views about car ownership, and that's hard to predict. Conceivably the market will extend in scope to the point that even with competitors Tesla will be able to command profits far better than the vehicle business for a long time.

There's a lot of variables that are hard to predict for where such a business goes long term. That said, even a 2-3 year lead in getting to fully autonomous could generate enough profits to build a few more gigafatories and auto plants.

I agree. It's difficult to guess how long the Tesla advantage would last. Still, it seems unlikely that any of the existing car makers would act on this until forced by circumstances. What's a huge and profitable opportunity to Tesla (or Apple or Google) is a nightmare to the existing industry. It is after all a wholesale destruction of their market and business model. The global car market might be expected to shrink by 80% and the much of the remaining market dominated not by sales but vertically integrated production for cars-as-a-service companies that existing car makers have no experience whatever with.

While it would be possible to use ICE cars or hybrids as autonomous fleet vehicles they would have disadvantages from higher energy, maintenance and support costs. Tesla's platform is ideally suited by being capable of both battery swap and fast charging as well as having the most advanced battery system. Tesla is closest to having a pure drive by wire system. Existing car companies could in theory compete but it would involve a pivot from being happy with the world as it is to assuming that world is doomed and actively working to destroy it faster. Apple and Google OTOH have many of the same positioning advantages as Tesla, especially if they take Musk up on the offer to use/license the Tesla powertrain instead of trying to reinvent it themselves.

 

[Ludus]

Few things to add to the mix. Folks keep talking about battery swap, but that doesn't look necessary to me. Peak demand will be served off of vehicles with maxed out batteries, as soon as demand drops some of them are going back to charging stations and then rotate.

Another idea is if the biggest challenge is city driving we might see them implement limited routes to parking lots just off highway exits as a start.

Battery swap makes sense for a mature system partly because it works well when you're talking about a fleet operating in a confined geography that's owned and operated by the same entity. There would be a "Fleet Management System" FMS that knows everything about every car under it's control second by second. The FMS could choose for every car whether to swap or move it to a nearby snake charger location (if it's not needed it might as well charge if a spot is available) or maybe reposition cruise it to where more business is anticipated based on lots of data and analytics. The big barrier with driver/owner cars is the ownership and handling of the packs. An FMS owns and manages everything. While there is a slow time of the day and an FMS will often choose to just pull a car up to a snake charger there will also be times that taking a car out of service for 5 minutes instead of 30 will make sense. A service area might have only a single automated swap station but a lot of snake chargers distributed in public places. I'd assume that both would be available for a fee to Tesla owners and the FMS would be managing their use requests and directing them also.

I agree that swap isn't necessary for it to work, it's just useful to optimize a mature system.

 

[The Blue Owl]

I just read this article in the WaPo about an encounter between a Google self-driving car and a cyclist at an intersection. Both of them stop. The cyclist is doing a track stand. Hilarity ensues.

It's a fascinating read. The changes to our world that will be brought about by technologies being developed as we speak will be dramatic. The revolution is happening right under our noses, but the vast majority of people (including myself) don't have a feel for what it will actually be like once the tech becomes mainstream. This little story drove this point home for me.

It also shows how far ahead Google is when it comes to self-driving software. I am confident Tesla will pull it off eventually, but it's not going to be a walk in the park.

 

[voyager]

BIG question is: will shared mobility programs affect sales and jeopardize Elon Musk's goal to hit break-even by 2020? The more Teslas will be shared, the less will be owner-bought... Or will it require Tesla to make even more cars, in the sense that Tesla will be offering a service (other car makers aren't), and will be needing more cars in order to meet demand? If there's one company that seems to understand The Bigger Picture best, then it is Google. Self-driving combined with shared use - that's no less than an 'attack' on public transport for the short to medium distance trips...

 

[electracity]

BIG question is: will shared mobility programs affect sales and jeopardize Elon Musk's goal to hit break-even by 2020?

Not really an issue for this decade. Tesla hasn't been able to release, on a timely basis, much less complicated software.

 

[replicant]

Elon's answer yesterday at BMWI indicates TM is not considering launching its own mobility service:

From a Tesla standpoint, we've just got to build the cars and try not to lose money. That's our goal, it's like an aspiration. Remember: we've got a big factory and we've got to pay the bill, so...

At 59m38s:

 

[Ludus]

Elon's answer yesterday at BMWI indicates TM is not considering launching its own mobility service:


At 59m38s:

I didn't get that from his response at all. Asked about whether Tesla will get into ridesharing services he basically laughed and deflected the question saying hey we're just struggling to survive doing what we do now. I 'd say this exchange has zero relevance to whether Tesla is contemplating this for 5 years in the future.

 

[schonelucht]

I didn't get that from his response at all. Asked about whether Tesla will get into ridesharing services he basically laughed and deflected the question saying hey we're just struggling to survive doing what we do now. I 'd say this exchange has zero relevance to whether Tesla is contemplating this for 5 years in the future.

To be honest, this whole speculative idea that Tesla one day will go into car sharing services comes from an equally vague exchange with Elon where he basically deflected the question too. Since that hasn't stopped people from taking their own ideas way too seriously, I won't hold back either. Tesla will not go into car sharing. Not now and not in 5 years down this line. If Tesla's is involved it will be as supplier of cars purchased from them.

 

[replicant]

To be honest, this whole speculative idea that Tesla one day will go into car sharing services comes from an equally vague exchange with Elon where he basically deflected the question too. Since that hasn't stopped people from taking their own ideas way too seriously, I won't hold back either. Tesla will not go into car sharing. Not now and not in 5 years down this line. If Tesla's is involved it will be as supplier of cars purchased from them.

+1. The (expected) SDK will allow on-demand companies to install their application on the car dashboard. Far into the future, when Tesla produce millions of almost-fully autonomous cars, perhaps they'll consider competing in this area. In the meantime, as Elon said, they're just trying to expand by selling cars to people - not algorithms.

 

[Ludus]

To be honest, this whole speculative idea that Tesla one day will go into car sharing services comes from an equally vague exchange with Elon where he basically deflected the question too. Since that hasn't stopped people from taking their own ideas way too seriously, I won't hold back either. Tesla will not go into car sharing. Not now and not in 5 years down this line. If Tesla's is involved it will be as supplier of cars purchased from them.

You are right of course that it's all completely speculative. I am curious though why you think Tesla and other carmakers would stay out of car sharing assuming completely self driving cars. There is growing bubble of speculation about this. A lot of informed sources including Musk have said complete autonomy is less than 5 years away. Starting with this assumption it seems reasonable to see the entire business model of the auto industry disrupted. BEVs, autonomy, networked vehicles and ride sharing seem to merge as a new model. Car companies could of course stick to their traditional role selling cars to whoever wants to buy them but they'd be giving up enormously larger profits. There are lots of background assumptions we aren't used to questioning about how the car business works that change pretty dramatically as soon as cars can really drive themselves.

 

[schonelucht]

I am curious though why you think Tesla and other carmakers would stay out of car sharing assuming completely self driving cars. There is growing bubble of speculation about this.

Compare with the reason why traditional car makers are so hesitant in bringing out EVs. Today they are a leader in their field : they have the know how, the brands, etc... to sell ICEs in a mature market that is difficult to enter. Throwing that away opens them up to vicious new competition from upstarts like Tesla.

Same thing, car sharing will be a threat to the established model of selling a car and pocketing a direct margin at sale time. In the future, Uber can, without reservations, go all out in the message : you don't need to own a car, you just need the service to make mobility happen. Tesla (and other car manufacturers) can't : they stand to loose their individual sales.

Finally, I think car manufacturers will have a criticaly competitive disadvantage should they offer a mobility service : they are married to their own cars. Meanwhile, Uber and other players can pick and choose which car is best suited. Maybe in California it's a Tesla, maybe in Munchen it's an BMW, maybe in China it's a BYOD, maybe for executives it's a Mayback, maybe foor poor student folks it's a cut down skoda etc... Or even, maybe in Amsterdam city center it isn't a car at all but something else. Uber has a liberty of picking how it is going to provide its mobility service that Tesla (or other manufacturers) have not.

 

[electracity]

The first licensed autonomous car is likely a low speed urban taxi: a Google car. Tesla has no natural advantage in that business. The Google car itself can be a comfortable, safe golf cart. No ludicrous mode or falcon wing doors required or wanted.

About a hundred companies are believed to be working on autonomous car software. We don't know, and can't know, how Tesla is doing compared to other efforts.

I think that any company releasing an autonomous car within ten years that can operate at higher speeds off highway is unlikely.

 

[Ludus]

The first licensed autonomous car is likely a low speed urban taxi: a Google car. Tesla has no natural advantage in that business. The Google car itself can be a comfortable, safe golf cart. No ludicrous mode or falcon wing doors required or wanted.

About a hundred companies are believed to be working on autonomous car software. We don't know, and can't know, how Tesla is doing compared to other efforts.

I think that any company releasing an autonomous car within ten years that can operate at higher speeds off highway is unlikely.

We definitely have different expectations. It seems like the Tesla autopilot 7.0 is pretty close to your 10 year prediction, what...3 days later? I'm sure it's not exactly what you meant but the flood of data now for machine learning and iteration will make for pretty visible and rapid improvements. By the end of 2016 Tesla will have a billion miles of real world road data. Starting now everyone will have a very good idea who is in the lead and how fast they are progressing. It will be Tesla and the other 99 who haven't even gotten to the point of putting out a beta product and starting mass data collection.

Tesla's natural advantage is that it already has a polished attractive prestigious ultra-safe zero emission vehicle to use with it's level 4 IT when it arrives. Google doesn't. For quite awhile a Google car and a Model X might cost about the same for a ride. I know a few people who would prefer the model X. Falcon wing doors may not be needed but it's an exaggeration to say they're not wanted.

 

[SteveG3]

Jonas at it again. All but directly gets Elon to say Tesla is looking at this.

I think Tesla is keeping quiet for competitive reasons in addition to the lack of a fully baked strategy Elon referred to.

update: this can end up being something of a race to lock in market share with a particular kind of large customer. Tesla likely neither wants to highlight (to the other potential players) the race for this group of customers, nor Tesla's strategy to reach deals with these customers. I'll follow Elon's lead and not write more about this here, though I suspect Jonas has been and will continue to think about this extensively, and write about it.