You won’t believe what Uber’s CEO just said about Tesla

One of the key themes surrounding the future of mobility is self-driving vehicles.

Autonomous driving is a form of artificial intelligence (AI) and transportation platform Uber technologies (UBER 2.97%) and electric vehicle (EV) pioneer. adze (TSLA 3.05%) both invest heavily in this technology.

Interestingly, however, Uber CEO Dara Khosrowshahi and Tesla CEO Elon Musk have very different visions of how autonomous driving will be adopted in society. In a recent podcast episode of The Logan Bartlett ShowKhosrowshahi hasn’t been shy about casting some doubt on Tesla’s self-driving ambitions.

Let’s break down what he said during the interview and assess whether Musk overstepped his master plan.

What did Uber’s CEO just say about Tesla?

Tesla’s self-driving initiative is called a robotaxi — also known as a cybercab. Musk has stated that his long-term vision is to create a large fleet of Tesla vehicles that are fully capable of driving themselves.

Essentially, these fleets of smart cars could be sold into a number of end markets, including logistics and delivery, car rental services, and of course ride-hailing apps.

Another use case for robotaxis is that Tesla owners will be able to rent out their personal vehicles when they are not in use. Here Khosrowshahi raises some doubts.

During his recent interview with venture capital investor Logan Bartlett, Khosrowshahi proclaimed that he is skeptical that Tesla owners will want a “complete stranger” to access their vehicle.

I completely understand this concern on the surface. However, below I will explain why I see some holes in Khosrowshahi’s logic.

Image source: Getty Images.

Words can be deceiving

Khosrowshahi’s criticism of Tesla should be taken with a grain of salt. Uber is also investing heavily in self-driving, particularly in partnership with Alphabetits self-driving car subsidiary, Waymo.

Furthermore, while on Bartlett’s podcast, Khosrowshahi hinted that Uber is open to working with other self-driving developers and said, “we hope Tesla will be one of those partners.”

So while Khosrowshahi expresses concern about some specific applications surrounding robotaxis, he more or less admits that he thinks Tesla has other opportunities beyond car rentals.

Musk’s idea for a peer-to-peer car rental service isn’t exactly new. One of the most popular car rental marketplaces is a company called Turo. Of course, renting a car from a stranger involves a number of fundamental risks. But to make an analogy, Turo is for cars what Airbnb or Vrbo is for rental properties.

Despite some risk factors, Turo’s proof of concept has garnered high-profile investors, including Jameswhich invested $250 million in 2019. Turo’s valuation of about $1 billion not only makes it a unicorn, but it’s also about the same as Hertz Globalhis car rental business.

Trillions of dollars could be at stake

Ark Investment Management CEO and longtime Tesla supporter Cathie Wood said she believes robotaxi could be a $10 trillion opportunity.

I’ll be the first to admit that the total addressable market (TAM) estimate seems exaggerated. Frankly, since the robotaxi hasn’t officially launched yet and the long-term demand for Tesla’s electric vehicles is unknown, it’s virtually impossible to say whether Wood is even very accurate.

I’ll take a conservative approach and even concede that Khosrowshahi may be right that a business-to-consumer (B2C) approach to robotaxi may not achieve the parabolic prospects that Musk and Wood believe. Like many new technologies, robotaxi may have a few early adopters in the B2C space, but ultimately fails to reach critical mass.

Even with these assumptions, the examples explored above illustrate that the car rental business alone is worth several billions. Moreover, delivery services such as DoorDash, Instacartand even logistics companies included Amazon, UPSor FedEx could reap massive cost savings if self-driving fleets actually catch on. This is in addition to the already existing investments made by ride-hailing platforms such as Uber.

For this reason, while the B2C aspect of self-driving cars remains questionable, I see a huge opportunity when it comes to business-to-business (B2B) applications.

Given the above, I’m not too worried about whether or not Tesla’s robotaxi will be successful in some capacity. In any case, I would understand if investors are simply skeptical that self-driving will ever become a truly mainstream part of society. If that’s your concern, it’s reasonable to shy away from investing in Tesla.

But I’m not entirely convinced that Khosrowshahi’s concerns are that big.