Tesla, Inc. TSLA is due to hold its robotaxi unveil event on Aug. 8 and investors and analysts are equally excited about the opportunity it presents. Future Fund’s Gary Black, a Tesla investor, on Tuesday suggested that the robotaxi may not take off strongly before the full self-driving technology is made fully unsupervised.
What Happened: A Tesla influencer on X worked out the benefit-cost ratio of the Elon Musk-led company launching a ride-sharing service. His analysis showed the service offering fetching revenue at an annual run-rate of $1.4 billion to start with. The influencer said Tesla should subsidize rides on its rideshare app ahead of the robotaxi unveil and require all drivers to drive Tesla vehicles and, if possible, be highly rated on other rideshare apps.
The penetrating pricing strategy of offering rides at lower prices than competition including Uber and Lyft would increase awareness about the app and also lure users to it, he said, adding that Tesla should use its cash reserves for it.
Working out the math, the influencer said assuming Tesla’s rides number 359 million, half as much as Lyft did in 2023, and a price of $17.43 as opposed to the $19.43 Lyft charges, the $4 the former makes can fetch it revenue of $1.4 billion.
Black commented on the influencer’s robotaxi thesis and said, “Those thinking $TSLA can just offer a supervised (with driver) ride-hailing service to compete with Uber and Lyft until unsupervised ride-hailing becomes available are day-dreaming.”
The fund manager said he understands the logic of Tesla setting up an exclusive network and starting to collect data and gain network effects. But he does not see it working unless Tesla discounts pricing. “But if not cheaper, what's the consumer proposition?” he said.
See Also: Everything You Need to Know About Tesla Stock
Why It’s Important: Tesla is going through a soft patch amid the slowdown in EV demand, forcing it to look for other avenues to shore up revenue. Long term, Musk wants Tesla to evolve as an “AI & Robotics” company. In the near- to mid-term, the company’s hopes mainly hinge on robotaxis and potentially a low-end EV.
Cathie Wood’s Ark Invest, which recently updated its valuation framework for Tesla, sees the company’s stock hitting $2,600 by 2029. In the firm’s valuation, robotaxis accounted for 63% of Tesla’s total revenue, 86% of EBITDA and 88% of enterprise value.
As Black remarked, the success of robotaxi adoption hinges mostly on Tesla’s FSD graduating from fully supervised to unsupervised.
Tesla ended Tuesday’s session up 2.61% to $187.35, according to Benzinga Pro data.
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