By: Benjamin He
Recently, Tesla, along with its chief executive Elon Musk, acknowledged that they’ve been trying to convince the Wall Street Journal that its declining electric car sale rates are not the future of the company. Instead, they claim to be going in a different direction. Tesla has made a pivot with its cars, edging its focus towards AI.
Tesla, the world’s current most valuable automobile supplier, specializes in making cars. Recently though, Tesla has been showing an interest in artificial intelligence, otherwise called AI. According to Mr. Musk, the company Tesla has been investing in a new AI-based car line called robotaxis, which he claims will be able to operate anywhere, in any condition. Tesla has been working on perfecting and testing the vehicles. Additionally, they’re working on regulatory approval to put the cars on the roads, Musk stated in a conference call.
The push for robotaxis, says Mr. Musk, will give Tesla’s stock market value (currently around 700 billion dollars) a huge boost: into the realms of trillions of dollars. This boost would certainly be useful to the company, which hasn’t been doing too well recently. But, the robotaxis and other projects and regulations surrounding it will have to be figured out first.
The first thing that has to change must be the perspective of people on cars. From the New York Times, “The experience of driverless taxi services like Waymo and Cruise in Phoenix, San Francisco and other cities raises questions about when such offerings will become profitable and how much money they will make.” Just how long it takes for the robotaxis to work remains to be seen.
There will also be some competition that Tesla will have to contend with. Companies like Waymo, a company for self-driving cars, and other ride hailing services like Uber and Lyft have long dominated the markets and will be threats in the industry.
“It’s a super competitive business that’s barely profitable,” said Ross Gerber, chief executive of Gerber Kawasaki Wealth and Investment Management, which owns Tesla and Uber stock, said of AI vehicles.
However, the business itself is worth a lot, despite not being as profitable and takes money to start up (which may not be a problem for a large company like Tesla). The robotaxi business is estimated to have around $5 trillion in worth. RBC capital markets totaled the economic potential of Tesla’s robotaxis already accounted for over $400 billion of its stock value.
For the cars it currently sells, Tesla offers 2 different driver assistant softwares, Autopilot and Full Self-Driving that costs $99 per month. Those systems are estimated to also be large sources of profits.