Musk has introduced the concept of the Cybercab, a self-driving vehicle designed to operate on Tesla's ride-hailing platform. This innovation will enable vehicle owners to generate income by participating in the autonomous cab network, which Musk likens to a blend of Airbnb and Uber.
Currently, Tesla's vehicles utilize cameras and artificial intelligence for driving, requiring driver oversight but avoiding the expensive additional hardware typically associated with radar and lidar systems used by other robotaxi competitors.
Musk believes that advancements in this technology will allow Tesla to penetrate a nascent and heavily regulated market that has seen significant financial losses for other companies.
Investors are intrigued by Musk's projection that the robotaxi venture could elevate Tesla's valuation from $750 billion to $5 trillion. They are eager to see a prototype and assess how quickly Musk can achieve mass production profitably. Additionally, they seek clarity on regulatory challenges and the potential for Full Self-Driving (FSD) technology, currently classified as partial automation, to surpass human driving safety.
"They need to make progress because this has been discussed and speculated upon for quite some time," remarked Elliot Johnson, chief investment officer at Evolve ETFs, which invests in Tesla. He does not anticipate any financial impact from Thursday's announcements for at least one to two years.
In 2019, Musk expressed strong confidence that operational robotaxis would be available by the following year. However, this year he shifted focus away from plans for a new, affordable vehicle to prioritize robotaxis, asserting that Tesla should be viewed as an AI robotics company rather than merely an automaker.
Few analysts anticipate a fully operational product.
According to Bernstein analyst Toni Sacconaghi, "We expect the robotaxi event to be rich in vision but lacking in immediate outcomes or incremental revenue opportunities." He noted that the company has a history of being overly optimistic, particularly regarding its Full Self-Driving (FSD) technology, and emphasized that the details are crucial.
Sacconaghi also mentioned that Tesla might provide details on more affordable versions of its current models and offer updates on its humanoid robot, Optimus.
HIGH EXPECTATIONS AND RISKS
Anticipation is high for the upcoming event, titled "We, Robot," which appears to reference Isaac Asimov's "I, Robot" series of science fiction stories. Tesla's stock, which has faced challenges in recent years due to concerns about competitors with more affordable and innovative models encroaching on its market share, has risen nearly 50% since Musk announced the transition to robotaxis. However, expectations for stock volatility in Tesla over the next month are nearing a two-year peak, largely due to uncertainties surrounding the robotaxi event, as indicated by options data from Trade Alert.
The journey to market for self-driving vehicles has been lengthy and expensive for other companies.
Currently, Alphabet's Waymo is the only U.S. company operating uncrewed robotaxis that charge fares. Other competitors include General Motors' Cruise, which is re-launching its robotaxi service with a safety driver after a previous accident led to a suspension of operations, and Amazon's Zoox, which is expanding its testing of driverless taxis that lack steering wheels and pedals.
To manage costs, Musk has opted to rely solely on cameras for sensors and may develop the initial version of the Cybercab using the existing platform that supports the Model 3 and Model Y.
Tesla gains valuable insights from the data gathered from its extensive fleet of vehicles. However, investors and analysts caution that advancing to a level of automation that eliminates the need for driver oversight—beyond the current Full Self-Driving (FSD) technology, which has faced heightened regulatory and legal challenges following at least two fatal incidents—will be a significant challenge.
CFRA Research analyst Garrett Nelson emphasized that achieving this goal is likely several years away, with numerous technological obstacles, safety evaluations, and regulatory approvals still to be addressed. He pointed out the growing disparity between the stock's high valuation and the reality that Tesla's earnings growth has stagnated.