Tesla Network - for profit ride sharing managed by Tesla

[Johan]

Annonced today, in a kind of sneaky way: mentioned on the order page under details for the new AP options:

Please note that using a self-driving Tesla for car sharing and ride hailing for friends and family only is fine, but doing so for revenue purposes will only be permissible on the Tesla Network, details of which will be released next year.

Look, it's been said again and again on this forum, rightly so: technical advances and new features really doesn't make the stock jump. What does is stuff that will definately impact the bottom line. Point in case: Tesla Network, Tesla hosted autonomous ride sharing - Tesla shares profits with customer. Boom.

We've been over this up and down, the analysis has been done at least in broad strokes, there's nothing to misunderstand: Cars typically spend something like 16-20 hours standing still. EVs are far cheaper to operate and will only get cheaper. Autonomous driving cuts out the cost of the human driver. They will be able to undercut any competition and still be profitable, and because of the lower price the personal autonomous car ride giving market will explode. Good times.

 

[Johan]

Elon has been saying this would happen for some time, people have hard time listening to him sometimes, or believing he will do what he says he will do. Strange given his track record.

Straight from Elon's own blog post: Master Plan, Part Deux

You will also be able to add your car to the Tesla shared fleet just by tapping a button on the Tesla phone app and have it generate income for you while you're at work or on vacation, significantly offsetting and at times potentially exceeding the monthly loan or lease cost. This dramatically lowers the true cost of ownership to the point where almost anyone could own a Tesla. Since most cars are only in use by their owner for 5% to 10% of the day, the fundamental economic utility of a true self-driving car is likely to be several times that of a car which is not.

 

[hockeythug]

Musk will have to actually answer Adam Jonas's questions now.

 

[justdoit]

Yup. Waiting for a Jonas upgrade This was the article from last year Morgan Stanley Massively Hikes Price Target on Tesla, Says Stock Could Almost Double

 

[larmor]

Musk will have to actually answer Adam Jonas's questions now.

And now we know why this question was never answered earlier...

 

[austinEV]

I have 2 minds on this.

Investor track: Cool! This will force investors and analysts to factor in a portion of the massive Uber/Lyft valuation into the near future of TSLA. I mean, even if you put it at 10% that's billions. it's hard to dismiss. And Jonas loved him some ridesharing. This should, in any logical world, mean for a reset upward.

Owner track: Yeah right, in like 4 years. This is essentially the most demanding thing you can ask an autonomous car to do. I am willing to believe that we can sit in the drivers seat and space out in 1-2 years. But to get in someone elses car, with no one at the wheel... that is going to be a tough sell culturally. I am bullish on autonomy. the parts where you let people sit in their cars but the cars drive-- that has a societal good. Its safer and will cause roadways to be much more efficient. But the selling of driverless car service-- that has more hurdles and less obvious societal priority.

 

[Ludus]

Mobility App fleets require saturation of the market so people can get a ride without much wait. Tesla owners won't be more than a small fraction of the needed cars in any Mobility App market (for quite a long time).

Part of the announced plan was Tesla will use company owned vehicles when there aren't enough owners vehicles.

The real contribution to Tesla's bottom line is from using it's own vehicles in it's Mobility App fleet.

Vehicles used this way seem likely to generate profits an order of magnitude higher than the auto industry traditionally expects from sales.

 

[Ludus]

A metro area market requires several thousand fleet vehicles. There are only several hundred usable Teslas and only a minority want to participate at any time. In practice, the owner participation feature barely matters initially to the fleet operation which is 95% company vehicles.

Over time, the possibility of employing your vehicle in the Mobility App fleet stimulates sales in the area and owner vehicle participation increases. This doesn't cause any problems because the company vehicles can be self deployed to other Mobility App service areas as they are displaced.

Another feature of the approach is that it enhances the value of ownership and isn't a source of conflict with the existing business of selling cars...unlike for Uber where there's a fundamental conflict of interest with the drivers who are the foundation of Uber's current business.

 

[Johan]

Giving credit where credit is due - to Adam Jonas at Morgan Stanley.

Auto Industry Is Ripe for Disruption

From his report earlier this year:

"The sooner investors can make the transformation, we believe the more industry events will make sense over the next 12 to 24 months, as the story of industry disruption likely unfolds," says Jonas, who first called out the emerging trend of shared mobility as early as 2014, and has since been exploring its ramifications through the auto industry, changes in consumer behavior and the evolving technologies reshaping this space.

"Vehicle sharing can only take your vehicle utilization to about 50%-60% of its full potential, in our view," says Jonas. "And as long as these vehicles are human-driven, logistical inefficiencies will persist. Autonomous vehicles on the other hand remove the human bottleneck and the economics change substantially."

"We see the first serious application of fully autonomous transport to be in the form of public-private partnerships at a hyper-localized level of a city center," Jonas says. "We expect a potential announcement of proof of reality in a North American metropolitan area as early as 2016."

And this from 2015, where he raised his price target to $465 based on the percieved value of [autonomous] Shared Mobility:

Tesla will be a leader in self-driving technology: Morgan Stanley

“We view this business opportunity as potentially additive to Tesla’s existing model of selling human-driven cars to private owners and see potential for this model to conceivably more than triple the company’s potential revenues by 2029,” said the note. “That is, selling miles in addition to selling cars.”

So Jonas was probably just slightly early to the party in 2015, but I definately expect him to significantly up his price target now, and for other analysts to follow.

 

[Bgarret]

Think about this as one possible use:

NY Law firm:

An average lawyer bills at $400-500/hr, has a family, lives in Connecticut/New Jersey with a 1.5 hr commute each way. Has the option to a) drive self with 3hrs of lost productivity/day b) go by train with 1.5 - 2 hours of lost productivity per day depending on if they can work during the commute c) hire a driver/Uber at a cost of $250-300/ day (conservative). Usually it is a hybrid mix of all three.

Firm decides to buy a fleet of Model S/X. Even without the possibility of shared rides, car picks up individual who now bills for 2-3 more hours/day. ROI is $750-$1500/day. Send the car to get the billing attorney (consultant, etc.), drives individual(s) into town and drops them at the office. Drives out of NYC and parks in a cheap lot in Jersey, or heads to the supercharger to recharge, instead of parking in a costly downtown garage. The car is summoned to pick them up and take them home. Autonomous driving pays for itself in about 2 weeks (10 days at $750/day) and the Tesla is paid off in 3-6 months ($750/day x 100-120 days) from increase in billable hours.

Some may think this is a niche case, but I would guess there are hundreds of thousands of professionals that meet this criteria in each major city - Chicago, New York, Los Angeles, Dallas, San Francisco, Tokyo, Amsterdam, Beijing....etc. if there was a worry about Model S or X demand exhaustion going forward, you have a potential for a dramatic increase in fleet sales to high end businesses to increase billable hours and productivity.

 

[dalalsid]

I have 2 minds on this.

Investor track: Cool! This will force investors and analysts to factor in a portion of the massive Uber/Lyft valuation into the near future of TSLA. I mean, even if you put it at 10% that's billions. it's hard to dismiss. And Jonas loved him some ridesharing. This should, in any logical world, mean for a reset upward.

Owner track: Yeah right, in like 4 years. This is essentially the most demanding thing you can ask an autonomous car to do. I am willing to believe that we can sit in the drivers seat and space out in 1-2 years. But to get in someone elses car, with no one at the wheel... that is going to be a tough sell culturally. I am bullish on autonomy. the parts where you let people sit in their cars but the cars drive-- that has a societal good. Its safer and will cause roadways to be much more efficient. But the selling of driverless car service-- that has more hurdles and less obvious societal priority.

I'd like to go back to being 1 car family and use this. I'd pay 200$ a month to be driven to and from work - current meat-intelligence solutions are too expensive

 

[Bgarret]

My wife hates to drive...she might be willing to trade me in for a car that drives itself. Thank goodness I have other qualities.

 

[TheTalkingMule]

Love the idea of these first generation Model 3's driving autonomously in the background while their human is in control. Makes me feel MUCH better about this whole transition as it's going to need to be a wholesale shift. Tesla can build up the case while building knowledge then one day just flip the switch in one city.

 

[adiggs]

I have 2 minds on this.

Investor track: Cool! This will force investors and analysts to factor in a portion of the massive Uber/Lyft valuation into the near future of TSLA. I mean, even if you put it at 10% that's billions. it's hard to dismiss. And Jonas loved him some ridesharing. This should, in any logical world, mean for a reset upward.

Owner track: Yeah right, in like 4 years. This is essentially the most demanding thing you can ask an autonomous car to do. I am willing to believe that we can sit in the drivers seat and space out in 1-2 years. But to get in someone elses car, with no one at the wheel... that is going to be a tough sell culturally. I am bullish on autonomy. the parts where you let people sit in their cars but the cars drive-- that has a societal good. Its safer and will cause roadways to be much more efficient. But the selling of driverless car service-- that has more hurdles and less obvious societal priority.

I'm in your same mental model of things @austinEV - that the transition to people getting into an empty car that then drives them to where they're going will involve a cultural transition that will take additional time.

That being said - I also see Tesla putting fully L5 autonomous hardware into all of the cars it builds today as brilliant. As many have observed, that means Tesla is now acquiring miles of driving data from a rapidly building fleet of vehicles starting now. Tesla is going to find corner cases faster, in more variety, and is in a position to have their software get better faster than anybody else.

I'm having a hard time seeing how anybody else, based on what's been discussed publicly, will be able to compete with Tesla for the first year or more of volume autonomous driving on public streets by private parties (i.e. - take it out of the lab and use it in production).

 

[Alketi]

I posted this elsewhere, but essentially, starting from the first AP 2.0 car that ships, in less than 3 weeks Tesla will accumulate the same number of miles that took Google's cars 4 years.

And, they'll do this while making a profit on every car sold.

MobileEye, last I read, was talking about deployment of their next-gen system in 2018. All other car companies are talking 2020-2021 for L5 deployment.

This is, at least on the surface, an absolutely enormous lead for Tesla.

Further, Tesla's combined fleet learning mile advantage, plus the startup costs from Uber purchasing their own cars, makes it very likely that Tesla will reach an approved Robotaxi before anyone else. Possibly years before anyone else.

 

[trils0n]

I'm having a hard time seeing how anybody else, based on what's been discussed publicly, will be able to compete with Tesla for the first year or more of volume autonomous driving on public streets by private parties (i.e. - take it out of the lab and use it in production).

Hopefully it won't result to dirty tricks like the auto companies/Mobileye/dealerships/riding-sharing-companies lobbying the government to ban manufacturer fleet data collection under the guise of privacy or something similar, while they play catch-up. Or maybe we'll see laws like the dealership laws that prevent car manufacturers from engaging in ride sharing or taxi like services. If states can ban Tesla from selling and servicing their own product, it isn't a stretch to see them banning something like Tesla Network and forcing them to use third parties like Uber.

 

[adiggs]

Hopefully it won't result to dirty tricks like the auto companies/Mobileye/dealerships/riding-sharing-companies lobbying the government to ban manufacturer fleet data collection under the guise of privacy or something similar, while they play catch-up. Or maybe we'll see laws like the dealership laws that prevent car manufacturers from engaging in ride sharing or taxi like services. If states can ban Tesla from selling and servicing their own product, it isn't a stretch to see them banning something like Tesla Network and forcing them to use third parties like Uber.

You have an evil imagination. I hope we don't see it.

In fairness, there were some big business abuses of small businesses in the early days of the car industry that supported the initial creation of the regulations that we have so much grief from today. It'll be difficult for legislation to be adopted if there isn't clearly somebody harming somebody else.

Enabling private parties to check their personally owned Tesla (or fleet of Teslas) into the Tesla ride sharing app and making a business out of it, may prove to be an important component in keeping the legislation out of Tesla's path (but now I'm just engaging in speculation and guesswork).


Legislation that tries to intervene in fleet data collection will have to be extraordinarily cautious, as it could easily and accidentally legislate the Internet of Things out of existence. That's WAY bigger than just the auto industry, so its not really something I'm worried about. (It's just about the whole evolving economy).

 

[trils0n]

In fairness, there were some big business abuses of small businesses in the early days of the car industry that supported the initial creation of the regulations that we have so much grief from today. It'll be difficult for legislation to be adopted if there isn't clearly somebody harming somebody else.

Agree, unlikely to come to pass. Especially from the usual competitors like dealership associations and other car companies. But the terrible thought did pop into my imagination, so I assume others have thought/will think of it as well.

Enabling private parties to check their personally owned Tesla (or fleet of Teslas) into the Tesla ride sharing app and making a business out of it, may prove to be an important component in keeping the legislation out of Tesla's path (but now I'm just engaging in speculation and guesswork).

Also agree, I think it is probably a wise strategy to promote individual car owners to lending their vehicle(s) to the fleet, as opposed to say Tesla owning the entire fleet and running the ride service themselves.

 

[GoTslaGo]

Presumably if the car is in the Tesla Network there maybe a component of Vehicle to vehicle communication. This could be touted as a safety feature (which it is) and thereby "block" other vendors from trying to prevent Tesla from developing an autonomous fleet.

 

[justdoit]

I think it's understandable to think some owners won't want to commit their cars to a ride sharing service. But I can imagine this being a selling point for those who can't really afford a Tesla. I mean people are already doing it now where they're stretching themselves to be able to buy a Tesla but doing things like ride sharing or renting their car out to make up some of the payment.

Imagine if it was a selling point for people interested in Model 3 but couldn't afford to buy it. To tell them they'll get a cheaper monthly payment if they make their car available on the Tesla Network for 20 hours a month or something like that. Their monthly payment will actually go down the more they make their car available on the network. This would be a huge selling point for those who can't afford a 40k car.