Tesla's Ambitious Robotaxi Plans and the Future of Urban Transportation
How Autonomous Vehicles Will Disrupt Urban Transportation and the Taxi Industry
Tesla has been known to make pretty daring promises and deliver them… eventually. This robotaxi announcement is definitely one of them, with of course a completely unrealistic 2026 deadline which is absolutely wild because we know how hard it is for Tesla to ramp up new models; plus of course the technological gap of 100% autonomous cars.
Believe it or not, the goal is to have cars that do not even have a steering wheel. You sit there, the car brings you where you need to go and goes on. Any individual will be able to buy it and do whatever it pleases them with it, including using it as a regular car just without the driving or putting it out on a platform and using it as a source of passive revenue. And in terms of game theory, this is going to be even wilder than Uber and AirBnB combined.
Peek into the future
It’s a well-known business principle, any new technology will enable new usages and of course generate new problems to be solved. Let’s imagine what is going to happen when these cars get released:
In terms of regulation and capability it’s going to be an extra-tough pickle. Fleets of Waymo are already roaming the street of San Franscisco but it is doubtful that they could handle Parisian traffic and bureaucracy. Europe’s roads are not drawn with straight rulers. Let’s expect a release most likely limited to the US first.
Tesla says 2026, so probably they’ll deliver the first car in 2030, will be able to produce 1 a week for the first year and start ramping up later on.
Eventually they’ll meet their demand and the streets will start getting flooded with autonomous cars.
Somewhere along that timeline, the EU and other markets will pick up (either because Tesla went there or because some Chinese brand beat them at it)
And the story will repeat, country by country
This will obviously have a huge transforming impact on taxis.
One of the main things is that taxis are limited if not by the regulation at least by the capacity of their human drivers. Apart from charging once in a while, those robotaxis will be able to work non-stop during the night, holidays, etc. If you put the amortization cost of the car in front of the income it generates, this tips off the ratio quite a lot. This means that as long as you can pay off the leasing of the car with the income it generates, you can have as many cars as you want on the street.
“As many cars as you want” being limited by “as many cars you can buy” of course. At first only a few will be produced and this will hardly tip off the scale at city-level. A few happy owners will start generating good passive revenue and brag about it on social media.
Progressively however the competition is going to become extremely unfair to humans. To a point where they will probably get out of business. And then the competition will keep on increasing, until the profit margin on exploiting a robotaxi becomes as thin as an economy-class sandwich, exactly like exploiting a bitcoin mining rig today.
Meaning that in order to make a useful profit, it will soon start to be difficult as an individual. You can imagine some operations with large amount of initial capital will start existing, operating hundreds or thousands of cars at once, with dedicated maintenance crews and so forth.
So unless governments decide to break up this non-optimal Nash equilibrium, we can expect pretty similar patterns than those seen in cryptocurrency recently. Looking at recent history around tech innovations, the scenario laid above will almost certainly happen in most countries out there.
Business strategies
Now that you know the future, how can you make money out of it?
Specialized taxis
Quite obviously those robotaxis will be mass-produced and mass-operated. Leaving very little space for specific needs that one might have. A few ideas that might stick and expand in the future:
Hard-to-reach destinations — at least at the beginning, a lot of destinations that have unconventional roads our that are outside a well-known operational area will probably still need humans to take the decisions and operate vehicles with different capabilities
Luxury — the same way luxury shops sell you bags hand-crafted by expert artisans from a village in France, rich people will be happy to buy a transport with a human-enhanced service. Probably not driving, but instead dedicating their time and attention to the service of the passengers: serving drinks, carrying suitcases, polishing shoes or doing the hair… Your imagination is the limit
Optimization
Eventually the intense competition will make this business as profitable as OpenAI is open — not at all. The difference between life and death will lie in every single cent you can optimize, and specifically in something that humans do naturally today: predict where people will be ordering taxis from.
There is apparently no particular app doing this at the moment, although there are several research papers on this topic, making it at the ideal stage to be transformed into an app: the technology exists, it just needs to be turned into a product.
Today’s drivers are probably not so interested in paying for this, but when huge players are going to be fighting for the highest car utilization possible this kind of application would be absolutely essential.
A smart way to do it would be creating today an app with existing data sources, give it for free to all taxi drivers, collect as much data as possible and eventually be ready the day robotaxis roam the streets.
Financial product
As said before, Robotaxis are almost passive assets, quite similar to the way real estate operates. You need a lot of capital, a bit of maintenance and they generate a steady income.
And just like real estate, you can expect to see both huge institutions on the market but also many oportunistic individual players with smaller amounts of money, willing to invest a few thousands and earn a percentage on it.
So you can just collect capital from individuals, assemble a fleet, a maintenance crew and start billing a percentage of this captial every month.
Fleet management
The financial product of course goes hand in hand with the management of the fleet. While this is not going to be much ellaborated in this article, you can expect that many tools and services will be required for the management of such a fleet. Some akin to those already existing while others might be novel:
Dirt-cheap electricity — being one of the most prominent sources of spending, averaging the cost of electricity as low as possible will be a key
Vehicle cleanup — not only vehicles will have to be kept clean, but also you’ll have to know when to clean them: there is no way people will self-report throwing up an excess of Margaritas, meaning that some image-based assessment will have to be made after each trip
Mechanical repairs — more than cleanup, all cars will eventually break to some extent and need to be repaired. Same as with the cleanup, the interesting question is how will you know when something is broken? More importantly, when is something about to break?
Country replication
It used to be that people were excited to bring back alarm clicks from Akihabara because this technology was not available in Western countries. Globalization changed that, the same iPhone is immediately available in every single city in the world.
But this is not counting on regulations. You might or might not like the safety/innovation tradeoff made by the EU but it’s certainly creating opportunities as well.
Indeed, since these cars will be first available in other regions of the world, there will be no need even to trust this article to know what is going to happen or not. It will unfold under our eyes with the knowledge that it can’t happen yet in EU but that it will happen anyway in the future.
So for example you’ll easily be able to build up a taxi call prediction app like described above that is fed with data for major EU cities and wait for an US actor to start attacking the market for a fairly easy exit.
Conclusion
Beyond the hype surrounding fully self-driving vehicles, it’s interesting to see that Melon Tusk will probably be responsible for the miracle of binding Taxi and Uber drivers together into hating automated cars.
The landscape of urban transportation will be profoundly transformed into a financial asset, ensuring war, speculation and other game theory shenanigans. If you like to watch the world burn, you’re in for a fun time ahead.
This will obviously create a whole new ecosystem around it, from the financial instruments that will make it possible to the reorganized car-cleaning crews.