Tesla's Robotaxi Platform Could Account For 90% Of EV Giant's Enterprise Value Over The Next 5 Years, Says Ark Invest Analyst

EV giant Tesla Inc‘s TSLA upcoming unveiling of its dedicated robotaxi product on Oct. 10 is the first step towards unlocking a multi-trillion dollar market, according to Ark Invest analyst Tasha Keeney.

What Happened: Keeney said in a blog post on Tuesday that she expects Tesla’s upcoming robotaxi unveil and subsequent launch of its autonomous ride-hailing platform to dominate Tesla’s valuation, nearing about 90% of its enterprise value over the next five years.

Once Tesla achieves full driving autonomy with future updates of its full self-driving (FSD) driver assistance software, the company could launch a robotaxi service in the next year or two, Keeney said. During Tesla’s second-quarter earnings call in July, CEO Elon Musk said that the company will achieve autonomous driving by the end of this year or in 2025.

Will Production Be A Hurdle? Production of a low-cost robotaxi/ cybercab should not be a bottleneck to the launch of Tesla’s robotaxi service, according to the analyst. The company could deploy existing Model 3 and Model Y vehicles equipped with FSD to jumpstart the service instead.

Furthermore, Tesla, unlike Alphabet Inc’s Waymo, has the ability to scale its fleet quickly, the Ark analyst said.

“Like Waymo, Tesla is likely to launch its robotaxi service city by city; but unlike Waymo, it should be able to scale much faster, because it will not rely on HD maps or geofencing. Perhaps Tesla's most important advantage over Waymo, however, is its data lake of real-world driving miles,” Keeney said.

While Tesla has been collecting road data with the help of its large vehicle fleet driving all across the U.S., Waymo’s fleet is limited by its size and limited deployment to select cities, Keeney noted.

Furthermore, while Waymo has to rely on automakers such as Zeekr and Hyundai Motor to make its vehicles, Tesla has the benefit of making their own.

“ARK estimates that Waymo's vehicles cost more than $100,000 to produce, its sensor set alone ~$40,000+, though it is working to reduce costs. Tesla's Model 3 costs $40,000, sensors included. While it needs to build backend support for remote vehicle assistance and customer support, Tesla should be able to leverage its existing factory, charging, and service infrastructure to scale efficiently,” Keeney wrote.

Will Regulatory Red Tape Pose A Hurdle? Regulatory approvals will likely pose less trouble than technical challenges to achieving fully autonomous driving for Tesla given that Waymo and GM’s Cruise have already paved the path, Keeney said. In the U.S., 40 states have either approved autonomous vehicles explicitly or not prohibited them, she added.

Furthermore, autonomous ride-hail services could undercut the price of human-driven ride-hail services with higher utilization rates, Ark said. The lower prices should subsequently stimulate demand and expand the market over time, the analyst opined.

“Thanks to its lower cost structure and the price umbrella provided by traditional ride-hail services, we believe Tesla could command a take rate more than double the ~30% that of Uber,” Keeney said on an optimistic note.

Why It Matters: Tesla investors are now looking forward to the robotaxi event this week to give Tesla stock a boost after its third-quarter delivery numbers fell below whisper numbers.

The robotaxi unveiling event was initially slated for Aug. 8. The company delayed it to Oct. 10 to make a few important changes aimed at improving the robotaxi and to give itself time to prepare a “couple of other things” to showcase at the event, company CEO Elon Musk said in July.

Price Action: Tesla’s shares gained 1.52% to close at $244.50 on Tuesday, but declined marginally by 0.08% in pre-market trading on Wednesday. Year-to-date, the Tesla stock has declined 1.58%, according to Benzinga Pro data.

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Photo courtesy: Tesla