Former Tesla Inc. TSLA executive Jorge Milburn said on Monday that no autonomous ride providers will be able to compete with the EV giant on cost once it starts deploying autonomous vehicles for ride-hail.
What Happened: “If Tesla follows a saturation strategy in each market they enter and then squeeze out rivals via price, then the market is theirs to take,” Milburn said. Milburn was the Global head of growth at Tesla and supervised the company’s marketing team until it decided to lay off 10% of their global workforce in April last year.
As per Milburn, Uber Technologies Inc.’s UBER scarcest resource is drivers. Acquiring drivers for a platform is hard and expensive, he noted while adding that drivers tend to choose the ecosystem with the highest revenue or the most saturated platform in a location. However, once you eliminate the need for driers with robotaxis, the scarcity too is removed.
Uber is a marketplace with payments and customer support but owns no physical infrastructure, Milburn said. In contrast, Tesla has experience running physical operations and has service centers, charging partners, body shops, and more, making it easy for the company to figure out the physical operations of a robotaxi fleet. The company also knows to manufacture cars cheaply and at scale, he added.
“Competing with Tesla on cost will be almost impossible for any entrant, be it a middle-man, like UBER, or a provider like Waymo. Even if you build the infrastructure that Tesla has, you will never be able to amortize it like Tesla,” he said.
The only hurdle in Tesla’s path is the performance of its full self-driving (FSD) technology which faces troubles in sun glare or camera conclusions. While FSD currently requires active driver supervision, Tesla is confident that the software will enable autonomous driving in time, enabling it to run a robotaxi fleet.
“There may be some hiccups in the short term with reliability/robustness of their stack, but these will be ironed out in due course. If/when they solve this, then the potential is quite unbound for them dominating in this space,” the former exec said.
Fund Manager Is Not Convinced: Tesla bull and The Future Fund Managing Partner Gary Black, however, is not convinced.
“You're not giving UBER credit for its 170M MAUs (monthly active users), which brings UBER's cost per ride way down. TSLA won't have a network anywhere near that large, so it's hard to see how it can have costs equal to UBER if both offer unsupervised autonomy as options on their app,” Black said.
Black has previously said that he sees Uber continuing to be the largest ride-hailing player globally in the future if it offers autonomous rides as well.
"Those predicting the imminent demise of Uber would be like predicting Amazon couldn’t survive once all manufacturers offered their goods directly to consumers, bypassing Amazon. That of course didn’t happen," he added.
Why It Matters: Uber already has partnerships in place with Alphabet Inc‘s Waymo. Waymo is eyeing offering members of the public in Atlanta autonomous rides exclusively through Uber starting later this year. This collaboration will see Uber managing and dispatching a fleet of Waymo’s fully autonomous, all-electric Jaguar I-PACE vehicles.
Tesla CEO Elon Musk said last month that the company will start testing autonomous ride-hailing service in Texas in June with vehicles deployed with its full self-driving (FSD) driver assistance technology.
Musk has previously said that Tesla’s robotaxi fleet will function like a combination of Airbnb and Uber. While a certain portion of the fleet will be owned by Tesla, individual customers can also add or subtract their vehicles to the robotaxi fleet at will. As for riders, they can summon a car using the Tesla App, Musk said, putting Tesla as a competitor to Uber.
Uber CEO Dara Khosrowshahi has previously said that the company would be interested in working with Tesla's autonomous vehicles as well if the latter is interested.
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