“`html
Tesla’s Robotaxi Launch: A Game-Changer for the Future of Transportation
If this robotaxi business scales, it could mean a significant boost in Tesla’s overall profit margins.
Today is a pivotal moment. After years of testing and extended timelines, Tesla (TSLA) will unveil its self-driving robotaxi at its “We, Robot” event this evening.
At 7 p.m. Pacific time, Elon Musk will introduce Tesla’s Cybercab — an autonomous vehicle that he believes could become the company’s most significant launch of the decade.
However, Tesla isn’t the sole player in this field. As noted in previous reports, Alphabet’s (GOOG) Waymo and Baidu’s (BIDU) Apollo Go are already completing around 100,000 driverless rides weekly.
Why is Tesla’s robotaxi launch significant?
This event may be the first opportunity for consumers to see a fully autonomous vehicle that they could park in their own driveways. Such a moment could signal a substantial shift for the entire industry.
Now is the best time to get ready for this event. Let’s explore what to expect this evening.
What to Expect from Tesla’s Robotaxi Reveal
We anticipate the “We, Robot” event will clarify three key aspects of the robotaxi:
- Design: what the Cybercab will look like and its technology.
- Business: details on mass production, sales, and ride-hailing service.
- Regulation: steps Tesla is taking to secure regulatory approval.
Let’s begin with the anticipated design of the vehicle.
The Robotaxi is expected to resemble a “living room on wheels”— likely an oval-shaped car equipped with multiple seats and entertainment screens but without a steering wheel. This design aligns with other self-driving companies like Waymo and Zoox, who aim to eliminate steering wheels in their vehicles as well.
Regarding technology, Tesla has traditionally favored a cameras-only system. However, we predict the Cybercab will incorporate various sensors. This speculation stems from the success of other autonomous vehicle firms like Waymo, which utilize a mix of cameras, radar, and lidar (light detection and ranging). Their proven effectiveness suggests that a diverse set of sensors may enhance detection, safety, and overall performance.
Should Tesla diverge from its initial camera-only design by adding new sensors, it could bolster safety and regulation efforts, leading to greater chances of securing approval for its self-driving cars.
A Potentially Profitable Business Model
Regarding the business model for the Cybercab, we don’t expect extensive details tonight.
However, we believe Musk will provide insights into the launch of public robotaxi sales and the initiation of Tesla’s own ride-hailing service. We wouldn’t be surprised if the rollout occurs in 2025, possibly starting in Austin, Texas, or Phoenix, Arizona.
That said, since ramping up production takes time, Musk may not clarify timelines for public robotaxi sales. Nevertheless, the economics of a robotaxi business appear appealing.
With the introduction of its ride-hailing service, Tesla could run an autonomous transport business without sharing revenue with human drivers, effectively tapping into a lucrative new sector.
Moreover, on the automaker side, Tesla will likely sell these AVs along with their self-driving software, generating two revenue streams — a lower-margin, one-time sale from the car itself, and a high-margin, recurring income from the software.
If this model scales, Tesla’s profit margins could rise dramatically, leading to more stable profits.
Now let’s address the regulatory aspect, which may be less glamorous but is critical for this robotaxi launch.
Currently, only a few companies have regulatory approval for fully autonomous ride-sharing in the U.S. Waymo and Cruise have gained approval in select cities, while Tesla is facing scrutiny from the National Highway Traffic Safety Administration and the Department of Justice regarding its Autopilot and Full Self-Driving features.
Given this, it’s safe to say Tesla’s relationship with regulators isn’t ideal — and they will play a vital role in deciding if the Cybercab can operate on public roads.
The crucial question is: How will Tesla secure this approval?
This is perhaps the most uncertain aspect of tonight’s presentation. Yet, we speculate that achieving regulatory approval may require Tesla to modify its design, potentially incorporating additional sensors to enhance safety. Other firms that have secured such approvals utilize technologies like radar and lidar to mitigate risks.
If Tesla incorporates these sensors and partners with suppliers for this purpose, it could unlock significant profit potential for investors.
Often, the best investment moves following a product launch involve not just the company at the forefront but also its suppliers, who may outperform in the stock market.
Final Thoughts on the Robotaxi’s Potential
We anticipate an impressive showcase from Tesla tonight. This event may well mark the transition of autonomous vehicles from experimental projects to a mainstream phenomenon.
If the Robotaxi develops into a groundbreaking product, Tesla’s stock could see considerable growth. However, history shows that some supplier stocks might experience even greater increases.
For example, since launching the first iPhone in June 2007, Apple (AAPL) has seen its stock rise over 6,000%. Interestingly, Broadcom (AVGO), a key supplier for Apple, has experienced an astounding 16,000% increase in stock value since then.
“`
Tesla’s Model 3: A Catalyst for Suppliers’ Stocks
Since its debut, Tesla’s Model 3 has revolutionized the electric vehicle (EV) market. Launched in July 2017, this car is considered a game changer, contributing to a significant rise in Tesla’s stock, which has surged approximately 1,500% since then.
Interestingly, Tesla relied on chips from Nvidia (NVDA) to power the Model 3’s innovative Autopilot technology. Nvidia’s success mirrors that of Tesla, with its stock skyrocketing by about 14,000% since the model’s release.
As Tesla gears up for the launch of its new Cybercab, investors may find promising opportunities among its key suppliers. This debut is expected to spark a substantial rally among stocks in the autonomous vehicle sector.
To discuss this exciting development further, I recently hosted a special event focusing on potential investment strategies tied to the upcoming Cybercab launch.
Don’t miss the replay of this event, which could set the stage for significant financial gains as the market reacts.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
P.S. Stay updated with the latest insights from Luke by reading our Daily Notes! Explore the latest issue on your Innovation Investor or Early Stage Investor subscriber site.