Can robotaxis make a profit? Experts are skeptical as Tesla prepares to unveil plans.

Tesla ( TSLA ) CEO Elon Musk has long touted autonomous vehicles as the company’s future.

At his shareholder meeting in June, Musk said the technology alone would increase the company’s value at least tenfold.

But with Musk poised to unveil details on Oct. 10 about a fleet of self-driving taxis he’s been teasing for years, skeptics warn that robotaxis could be some way from becoming a profitable business.

“It might be a little difficult to get crazy excited,” RBC Capital Markets analyst Tom Narayan said of the potential stock reaction for Tesla. “That’s a long way into the future, so we just don’t know how big of an impact (the business) will have.”

Tesla’s entry into the market would put the company in direct competition with Google’s ( GOOG , GOOGL ) Waymo, which operates its fleet of self-driving taxis in Los Angeles, San Francisco and Phoenix, with a planned expansion in Austin.

While the timeline for any autonomous taxi from Tesla remains uncertain, analysts see Waymo’s business model as evidence of a challenging economy.

Unlike Uber (Uber) and Lyft (LYFT), which use vehicles owned and operated by individual drivers, autonomous taxi firms must own their entire fleet. This means overseeing the costs of maintenance, car insurance, charging and cleaning infrastructure.

It all adds up to an operating cost of $0.42 per mile per vehicle, according to a report by Lux Research. Chris Robinson, senior director of the energy team and author of the report, said the cost of owning a car was two to three times higher.

“You have to lower the cost of providing these services to be competitive with car ownership,” Robinson said. “That’s why I don’t think we’ll see car ownership fundamentally replaced any more than services like Uber and taxi drivers being replaced by robotaxis.”

Operational costs are compounded by the process of vehicle automation. Waymo’s current fleet consists of Jaguar I-PACE electric vehicles that are equipped for human drivers, but equipped with high-tech sensors and computers to achieve full autonomy.

While parent Alphabet does not specifically disclose revenue figures for its self-driving service, its business unit that includes Waymo posted an operating loss of about $2 billion in the first half of the year. Robinson estimates that equipment costs alone exceed $40,000 per vehicle today.

Amazon’s Zoox ( AMZN ) is trying to change that calculation with a vehicle built in-house specifically for autonomous use. The company’s toaster-shaped vehicles have no steering wheel, pedals or driver’s seat. The ride works bi-directionally, meaning it can drive both ways.

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The company is set to launch its service in Las Vegas next year. Co-founder and CTO Jesse Levinson said Zoox would not have survived and come to market without the support of Amazon, which acquired the company in 2020.

“Making a car is an expensive endeavor in general, but this is a new type of vehicle,” he said. “(You have to) build the autonomy stack, integrate it with this custom robotaxi, you have to collect many, many millions of miles of data. You have to do a lot of simulations, you have to develop all kinds of firmware and AI algorithms and the glue to connect it all together. Then you have to validate it in the field and prove that it is actually safer than a human. It takes a lot of time and a lot of capital to do all that.”

The consulting firm McKinsey & Co. estimated that the global self-driving taxi market could generate up to $1.3 trillion in revenue by 2030.

Tesla bulls argue that the company has clear advantages as a proven automaker armed with data from millions of drivers. But the company has yet to demonstrate that its self-driving technology can operate on its own, and Musk has yet to provide details on how any autonomous fleet would work.

Regardless of the delayed timeline, Narayan said he expects Tesla’s autonomous fleet to contribute to the company’s revenue in a significant way. In his latest note, he said robotaxis and full self-driving subscriptions would account for half of Tesla’s valuation.

“I’m a big believer in the robotaxi concept,” he said.

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