The Rise of Robotaxis

Robotaxis, autonomous vehicles (AV) designed for public transportation, represent a significant change in mobility. Companies like Tesla (NASDAQ:TSLA), Waymo, and Uber (NYSE:UBER) are competing to develop scalable, efficient self-driving vehicle fleets.

The Economics of Robotaxis

The economic feasibility of robotaxis is a primary concern for investors. Bernstein analysts note that while AVs are cost-competitive concerning active miles, ‘deadhead miles’—driven without passengers—remain an obstacle.

“Robotaxi cost per mile is below that of the current driver model. However, if we include deadhead miles… the unit economics may still be modestly negative today,” Bernstein analysts reported.

The report predicts AV costs will decrease, while traditional driver costs may rise due to labor and insurance expenses.

“Cost curves will diverge; AV costs will decrease while driver model costs will likely increase,” they noted. This trend could enhance profitability for robotaxi operators, though high operational costs mean gross profit doesn’t equate to EBIT.

Tesla’s potential disruption in the market comes from its lower capital expenditure due to a vision-only approach to autonomy. However, it lags behind competitors like Waymo and Cruise, who are already operating commercially.

The Technology Behind Robotaxis

The technology differentiating each company’s robotaxi is critical. Tesla uses a vision-only system for its Full Self-Driving (FSD) platform, relying on cameras and software. In contrast, Waymo and Cruise incorporate cameras, lidar, and radar for improved safety and reliability.

“Tesla is notable in its approach to autonomy in three ways. They mainly follow a vision-only system, whereas leading players like Waymo use a combination of sensors,” the report states.

Lidar, while costly, offers extensive mapping capabilities and works well in various environmental conditions. Tesla’s approach faces challenges in adverse weather and lighting, but it benefits from data collected from its expansive fleet to enhance AI models. Bernstein emphasizes that Tesla’s autonomy level remains between Level 2 and 3, while Waymo has achieved Level 4.

The Regulatory Landscape

Both technological advancements and regulatory challenges influence the scaling of robotaxi fleets. Waymo’s regulatory engagement started in 2012, allowing for gradual commercial operations.

“Waymo started self-driving trials in 2012… In 2017, it started trials without people,” which demonstrates their careful navigation of regulations.

Conversely, Tesla’s minimal regulatory engagement could hinder its robotaxi scale-up efforts. Bernstein highlights that Tesla has not applied for testing without drivers or pursued a commercial robotaxi license, possibly delaying its ambitions in the autonomous vehicle sector. Recent regulatory incidents, like Cruise’s license suspension in California, emphasize the strict oversight of robotaxi operations, which could further challenge Tesla’s ambitions compared to more engaged competitors like Waymo and Cruise.