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Tesla Network / Robotaxi Business Model
Tesla (TSLA) Q3 2020 Earnings Call Transcript | The Motley Fool
Martin Viecha -- Senior Director of Investor Relations
Thank you very much. Let's go through institutional investor questions. The question No. 1 is, as a bridge to the ride-hailing network, could you leverage the insurance product to give customers the ability to rent out their vehicles via the app, thereby enabling the car to make money for them? So basically proprietary version of Turo.
Elon Musk -- Chief Executive Officer
I think we're going to focus on enabling the robotaxi system. So you can just basically — like that's a sub — that's just really quite a small subset of the overall robotaxi or robocar thing, where you can have the car be autonomous for you. You can have the car be — share with friends and family. You can add or remove it from the network.
You can have it be entirely in the network. I mean if you're an Uber or Lyft driver, you could be managing a fleet of 10 cars. This sort of seems like a shepherd tending the flock type of thing. It's like you just get more, way more leverage.
So I think that's sort of — we could do that. It wouldn't be very difficult, but we're going to just be focused on just having an autonomous network that has sort of elements of Uber, Lyft and Airbnb. Yes.
How to folks read this? Tesla Network only with autonomy?
Martin Viecha -- Senior Director of Investor Relations
Thank you very much. Let's go through institutional investor questions. The question No. 1 is, as a bridge to the ride-hailing network, could you leverage the insurance product to give customers the ability to rent out their vehicles via the app, thereby enabling the car to make money for them? So basically proprietary version of Turo.
Elon Musk -- Chief Executive Officer
I think we're going to focus on enabling the robotaxi system. So you can just basically — like that's a sub — that's just really quite a small subset of the overall robotaxi or robocar thing, where you can have the car be autonomous for you. You can have the car be — share with friends and family. You can add or remove it from the network.
You can have it be entirely in the network. I mean if you're an Uber or Lyft driver, you could be managing a fleet of 10 cars. This sort of seems like a shepherd tending the flock type of thing. It's like you just get more, way more leverage.
So I think that's sort of — we could do that. It wouldn't be very difficult, but we're going to just be focused on just having an autonomous network that has sort of elements of Uber, Lyft and Airbnb. Yes.
How to folks read this? Tesla Network only with autonomy?
I do think a Robotaxi available for work (/charging) 24x7x365 can make 30K per year as claimed by Elon...
It is easy to see why a Robotaxi owned by Tesla is worth 100K, that is essentially 3-4 years of operation.
For a privately owned vehicle what is the split between Tesla and the owner?
I say minimum Tesla take is 20% of 6K per year, in theory the owner might make 24K per year, but only when the car is available 24x7x365
In that model, cars are an appreciating asset but I'm not sure the FSD software license is worth 100K.
Consider a 50/50 split, Tesla would make 15K per privately owned vehicle....they could then lower the cost of FSD
Where the car is only used privately, or available to the Tesla limited hours, the situation is tricky... 100K for FSD seems excessive.
There is lots of potential here, but getting the right business model is tricky...
Consider instead if after a cut off date it was no longer possible to buy FSD outright and FSD could only be leased.
That 'cut off' date is a good way of getting buyers off the fence...
For a lease the price can be higher, I suggest $6K per year or $500 per month... with a $1 discount for every hour spent working as a Robotaxi in the Tesla network, but only in the Tesla network, up to $400. So 400 hours or more working as a Robotaxi, FSD only cost $100 per month. With that discount, Robotaxi income is split 50/50, but the discount is a strong incentive to go with the Tesla network.
For a private user $500 per month seems excessive, but if that owner is trading in a Tesla with FSD, a special exemption applies and they are able to lease FSD for a more reasonable price. We can extend this to some sort of referral program, where both parties get a discount on FSD.
Somewhere there exists a fair model where Tesla makes a lot of money, but customers particular long term loyal customers are treated fairly. You might not like my model, but it isn't easy to come up with a model.
It is easy to see why a Robotaxi owned by Tesla is worth 100K, that is essentially 3-4 years of operation.
For a privately owned vehicle what is the split between Tesla and the owner?
I say minimum Tesla take is 20% of 6K per year, in theory the owner might make 24K per year, but only when the car is available 24x7x365
In that model, cars are an appreciating asset but I'm not sure the FSD software license is worth 100K.
Consider a 50/50 split, Tesla would make 15K per privately owned vehicle....they could then lower the cost of FSD
Where the car is only used privately, or available to the Tesla limited hours, the situation is tricky... 100K for FSD seems excessive.
There is lots of potential here, but getting the right business model is tricky...
Consider instead if after a cut off date it was no longer possible to buy FSD outright and FSD could only be leased.
That 'cut off' date is a good way of getting buyers off the fence...
For a lease the price can be higher, I suggest $6K per year or $500 per month... with a $1 discount for every hour spent working as a Robotaxi in the Tesla network, but only in the Tesla network, up to $400. So 400 hours or more working as a Robotaxi, FSD only cost $100 per month. With that discount, Robotaxi income is split 50/50, but the discount is a strong incentive to go with the Tesla network.
For a private user $500 per month seems excessive, but if that owner is trading in a Tesla with FSD, a special exemption applies and they are able to lease FSD for a more reasonable price. We can extend this to some sort of referral program, where both parties get a discount on FSD.
Somewhere there exists a fair model where Tesla makes a lot of money, but customers particular long term loyal customers are treated fairly. You might not like my model, but it isn't easy to come up with a model.
TheTalkingMule
Distributed Energy Enthusiast
- They think Tesla will blanket a city with Tesla Network - otherwise adoption will be low. Not sure I agree without that for several reasons.
- Car can be booked ahead potentially
- Adoption will be high even high as initially people will want to be driven autonomously as a novelty
- Tesla won't want the bad press of making 100,000 UBER drivers in one city redundant overnight
- It occurred to me that Tesla won't keep increasing the price of FSD. They will have to increase the price of the car or bundle FSD with the car. Last thing they want is for folks to buy the car only.
Doggydogworld
Active Member
In the long term, profitability could be well above even the most bullish models if Tesla stop selling vehicles and keep them on Tesla Network (TN) themselves.
Lots of synergies when they do this:
Lots of synergies when they do this:
- All profits kept by Tesla
- Tesla can place vehicles in the best locations - saturate markets one by one or have a car ready and available in all locations
- Tesla control the customer experience - improved cleaning plus cost control
- V2G control (predictable usage) & profits - explored in video below
- Tesla can build more vehicles - small battery robotaxi
- Tesla retain 100% of insurance market
- Tesla can control the customer experience by upgrading the fleet so that they don't get worn out
- Maximises the mission - ~100% of fleet operating as robotaxis 24/7
- Reduced need to worry about service centre customer experience etc.
- More superchargers can be in cheaper areas and can employ solar charging
- No advertising of cars required - TN will sell itself
- TN experience improved vs UBER more quickly as more vehicles will be available
- No sales centres required - solar roof can be advertised differently
- Semi could follow - Tesla build haulage company - city by city etc. allowing reduced number of mega chargers
- Tesla can suggest more customers stop off at the drive through margarita bar / burger restaurant that pay Tesla for the service - or better still owned by Tesla
- Tesla integrate better with Boring Co tunnels & other transportation options - want to get to the east coast - Tesla will buy your American Airlines ticket rather than Delta
- More customers familiar with Tesla = greater revenue on other products like solar roof
Telsa'd better foster an ecosystem than do it all themselves. I doubt Elon will accept to slow down and find census so other players can find their ways. I'm sure he'll prefer to keep a small part of the game for himself so he can continue to accelerate, even if this means leaving profits (monopolies) to others. Raising capital and making money is not an issue anymore for Elon/Tesla, even to fund Mars' colonization.
Year 2025 scenarios
1) Tesla sell 5m vehicles
Average sales price $30k plus 50% take-up of FSD at $70k
Total revenue = $150Bn = $45Bn profit
Profit from Robotaxis from that year of sales (assuming 1 car makes $40k and Tesla's share is 30%) - 5m*50%*$40k*30% = $30Bn
2 year profit = 45+45+30+30+30=$180Bn
2) Tesla keeps all 5m vehicles - funded from FSD revenues on previously sold vehicles.
Sales loss = $150-45 = $105Bn
Profit from Robotaxis from that year of non-sales (assuming 1 car makes $40k and Tesla's share is 100%) - 5m*100%*$40k*100% = $200Bn
Year 2 = $400Bn
2 year profit = 400+200-105-105 = $390Bn
V2G profits on top
3) Tesla sell all 5m vehicles
Average sales price $100k (FSD bundled)
Total revenue = $500Bn = $395Bn profit
Profit from Robotaxis from that year of sales (assuming 1 car makes $40k and Tesla's share is 30%) - 5m*100%*$40k*30% = $60Bn
2 year profit = 395+395+60+60+60 = $960Bn
Scenario 2 is a no brainer. Shareholders won't like it in the short term though. We will therefore most likely transition from 1 to 3 to 2.
Dave is looking bottom up from the consumer view rather than from Tesla's viewpoint. Non-Tesla vehicles will be available to those that want to own.
1) Tesla sell 5m vehicles
Average sales price $30k plus 50% take-up of FSD at $70k
Total revenue = $150Bn = $45Bn profit
Profit from Robotaxis from that year of sales (assuming 1 car makes $40k and Tesla's share is 30%) - 5m*50%*$40k*30% = $30Bn
2 year profit = 45+45+30+30+30=$180Bn
2) Tesla keeps all 5m vehicles - funded from FSD revenues on previously sold vehicles.
Sales loss = $150-45 = $105Bn
Profit from Robotaxis from that year of non-sales (assuming 1 car makes $40k and Tesla's share is 100%) - 5m*100%*$40k*100% = $200Bn
Year 2 = $400Bn
2 year profit = 400+200-105-105 = $390Bn
V2G profits on top
3) Tesla sell all 5m vehicles
Average sales price $100k (FSD bundled)
Total revenue = $500Bn = $395Bn profit
Profit from Robotaxis from that year of sales (assuming 1 car makes $40k and Tesla's share is 30%) - 5m*100%*$40k*30% = $60Bn
2 year profit = 395+395+60+60+60 = $960Bn
Scenario 2 is a no brainer. Shareholders won't like it in the short term though. We will therefore most likely transition from 1 to 3 to 2.
More from Dave which I disagree with - partly because it is predicated on Tesla selling cars:
It occurred to me that the Supercharger network is the Tesla Network's secret weapon. Who else will put in place thousands of snake chargers internationally? Also they are crucial for V2G.
Dave and Rob talk about FSD deliveries. Getting the parcel to the front door could be a significant challenge. It might be that delivery drivers will remain for a good while - they can switch off and watch Netflix en route and then just deliver to the door. Not a bad gig.
That kind of cleaning would be once per day...
With COVID there is an additional need to clean between customers... but not having a driver is a considerable advantage.
Sterilizing the car between customers during the say might be able to be possible with an airborne spray, the car could do that automatically and the spray fluid could be topped up each day..
Ultimately Tesla will need a good cleaning solution, but al competitors have the same problem..
It occurred to me that Tesla might charge for Robotaxi by the minute - no additional cost per mile etc. By keeping the rate simple, Tesla can make it an easy transparent sell.
Charging per minute will be required when people start using the vehicle to hold their luggage and many other use cases.
Charging per minute will be required when people start using the vehicle to hold their luggage and many other use cases.
Doggydogworld
Active Member
"True to their L4 designation, however, human drivers would still be required under the law, ..."
That's not Level 4, lol. L4 does not require a driver. Waymo's vans with no driver in Phoenix are L4. Teslarati got Germany's 2017 Level 3 legislation mixed up with the new L4/L5 proposal. Level 3 does require a driver, of course. Even though they passed the L3 law in 2017 and it recently achieved UNECE status, the actual regulations are just now being finalized. Carmakers like Mercedes plan to launch L3 later this year. It's not clear if Tesla will even apply for L3 operation, or if they'd get approved if they did apply. To my knowledge all carmakers applying use LIDAR, and the regulations may effectively require it. They definitely require real driver monitoring, which Tesla would have to add.
The L4/L5 law won't be passed until mid-year, actual regulations will take much longer. Here is a more rational article on the German legislation. It also gets the L4 driver issue wrong (German regs will require testing with safety drivers and full data reporting, but allow driverless operation with remote monitoring).
That's not Level 4, lol. L4 does not require a driver. Waymo's vans with no driver in Phoenix are L4. Teslarati got Germany's 2017 Level 3 legislation mixed up with the new L4/L5 proposal. Level 3 does require a driver, of course. Even though they passed the L3 law in 2017 and it recently achieved UNECE status, the actual regulations are just now being finalized. Carmakers like Mercedes plan to launch L3 later this year. It's not clear if Tesla will even apply for L3 operation, or if they'd get approved if they did apply. To my knowledge all carmakers applying use LIDAR, and the regulations may effectively require it. They definitely require real driver monitoring, which Tesla would have to add.
The L4/L5 law won't be passed until mid-year, actual regulations will take much longer. Here is a more rational article on the German legislation. It also gets the L4 driver issue wrong (German regs will require testing with safety drivers and full data reporting, but allow driverless operation with remote monitoring).
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