Why Elon Musk's Latest Venture is Likely to Fall Short

12-minute read
This is a linkpost; original at my Substack

Tesla Motors is going to enter the robotaxi business, and thereby increase the firm’s stock market valuation from around $740 billion to several trillions of dollars—at least according to Elon Musk. As incredible as Musk’s claim may sound, investors have learned the hard way not to bet against him. Then again, Musk falls short just as often as he succeeds.

When it comes to robotaxis, though, the former is more likely to be what happens. Why am I so confident? Because we know what it takes to succeed in that market, and Tesla doesn't have it. Tesla lacks both the necessary time, and the necessary culture.

Tesla and the Robotaxi Market

Robotaxis are still a niche service, available only in a few cities worldwide, and those cities are clustered in two countries: the United States and China. In the USA, the major players are Waymo, Cruise, and Zoox. In China, they are Pony.AI, WeRide, AutoX, and Apollo. In both countries, robotaxis are novelties, only available in sharply demarcated service zones. But they are present and offering rides for pay. And the size of their zones and the number of cities they service is growing. Significant disruption of the ride-hail market is still years away, but the potential for change to the market is significant.

Tesla, of course, is a disruptor itself. It’s not an exaggeration to say that the firm is the responsible party for the US market share of electric vehicles as a percentage of total vehicles sold going from zero in 2010 to ~7% in 2023. It’s a remarkable achievement, which the firm earned through excellent design, an unrivalled network of charging stations, and a sophisticated automated driver-assist system.

Building that automated driver-assist system (ADAS) is what makes Tesla think they can conquer the robotaxi market as well. Many high-end cars have ADAS. Mercedes, for instance, refers to their ADAS as “Drive Pilot”. Tesla’s ADAS is among the best, and is so good that the firm refers to it as “Full Self Driving.” The name is misleading, as Tesla cars are not ‘fully’ self-driving. During ADAS engagement they require a human to be present and actively monitoring and overseeing the ADAS. In response to mounting criticism of this misleading advertising, earlier this year Tesla quietly changed the na...

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