Is Tesla’s robotaxi in danger after Uber’s latest partnership?

One of the biggest innovations in the car market right now is autonomous driving. While many automakers have developed some form of self-driving capability, electric vehicles (EVs) are leading the way adze (TSLA -1.65%) seems to get the most attention. The company was due to showcase the progress of its self-driving fleet, called robotaxi, on August 8. However, Tesla CEO Elon Musk canceled the event at the last minute and rescheduled it for October 10.

In the middle of this hoopla, sharing platform Uber technologies (UBER -0.98%) took some shots at robotaxi viability. Just a few days ago, Uber announced a partnership with General Motors — a rival to Tesla in both electric vehicles (EVs) and autonomous driving. Let’s take a look at Uber’s new partnership and assess what it could mean for Tesla investors.

What is Uber doing with General Motors?

Uber has a number of relationships with car companies looking to disrupt the self-driving vehicle market. Most importantly, Uber works closely with Waymo — a subsidiary of Alphabet. At the end of August, Uber announced that it is also teaming up with a subsidiary of General Motors, called Cruise.

According to the press release, Uber plans to start rolling out rides with the autonomous Cruise vehicles next year. This means that Uber app users may be presented with an option to be picked up in a driverless Cruise vehicle, as opposed to a standard Uber ride with a human driver.

While this seems exciting on the surface, I wonder if this is the best move for Uber.

Image source: Getty Images.

Don’t judge a book by its cover

Cruise raised funds from people like SoftBank, Microsoft, Hondaand even Walmart. Indeed, this is quite an impressive list of investors.

However, Cruise has not been without problems for some time. Late last year, Cruise was forced to suspend operations in San Francisco due to safety concerns. This incident led to the voluntary suspension of operations by the company’s management across the country. Unsurprisingly, Cruise initiated a vehicle recall program and eventually its CEO and founder Kyle Vogt resigned.

To be fair, things haven’t really changed for Cruise in 2024 either. During General Motors’ second-quarter earnings call, investors learned that Cruise is delaying production of its next-generation vehicle, the Origin. As a result, GM recorded a $605 million impairment charge related to Cruise Origin.

On top of all that, Cruise’s operating losses were $458 million in the second quarter and totaled $900 million in the first six months of the year. Cruise has been far from a money-making machine for GM, and I wonder if its deal with Uber will lead to much.

Should Tesla be worried?

Uber can certainly benefit from self-driving vehicles as the company can save costs related to driver commissions. However, I think Tesla has more use cases when it comes to large-scale fleets of self-driving cars.

For example, Uber competes with delivery services such as DoorDash and Instacart. In theory, if Tesla achieves large-scale commercialization of robotaxis, the company could form partnerships with various delivery platforms and take on Uber more directly.

Another use case for autonomous vehicle fleets could be car rental services. While both Uber and Tesla could benefit from forming partnerships with car rental companies, I think Tesla has the advantage due to its manufacturing capabilities. Cruise has yet to prove it can mass-produce its vehicles, which is a problem when it comes to breaking into new markets.

As a Tesla investor, I’m not worried about the prospects of Uber entering the self-driving car space. I think the addressable market is big enough to have more players. Plus, given all the headaches surrounding Cruise over the years, I kind of see his deal with Uber as more of a lifeline than a real opportunity. To me, the partnership between Uber and Cruise is an interesting development, but I don’t necessarily see it as a big threat to Tesla.

For all these reasons, I think Tesla will easily outperform Uber and Cruise, and I don’t think the robotaxi initiative is in danger.