Tesla’s robotaxi prepares to compete with Uber, Lyft

• Tesla is expected to unveil a new service at its Robotaxi event that will affect Uber and Lyft.
• Tesla could offer incentives to drivers and lower their costs, challenging Uber’s market share.
• Analysts see Tesla’s entry as a potential long-term threat to the transportation giants, but also an opportunity to partner.

Elon Musk’s much-anticipated Robotaxi Day is finally happening Thursday night in Hollywood — and it has the potential to shake up the transportation industry.

Musk has touted Tesla’s Full Self-Driving software and its potential to create a network of robotaxis for years, and analysts told Business Insider that its entry into the ride-hailing industry could pose a long-term threat to Uber and Lyft. It may also force them to develop and expand their own autonomous vehicle offerings or seek a partnership with Musk’s company.

Tesla’s event is expected to include both a look at a new autonomous vehicle, the rumored Robotaxi, and an accompanying transportation network.

Tesla released a teaser of what the app for the ride-hailing platform would look like in June. The concept involves Tesla using its network of owners to create a fleet of autonomous robotaxis that can be summoned via an app. Musk suggested that participating Tesla owners could earn up to $30,000 a year.

A competitive threat to Uber, Waymo and Lyft

Tesla’s entry into the ride-hailing market will be a significant development for both Elon Musk’s electric car company and the current players who dominate it.

There was “considerable heat” from Lyft and Uber investors heading into the event, said Wells Fargo analyst Ken Gawrelski, who has an underweight rating on Tesla, an overweight rating on Uber and an equal weight rating on Lyft.

Gawrelski said Tesla will likely offer service at a lower cost than Waymo, and that there is also “a cost advantage for Tesla on a per-trip and per-mile basis.” Gawrelski has an equal stake in Waymo’s parent company, Alphabet.

Morgan Stanley analysts predicted earlier this month that Tesla would likely offer a low-cost or free FSD software update to drivers using the ride-hailing service, along with a lower acceptance rate for drivers to encourage greater adoption. fast.

The ride-hailing industry has so far been dominated by two major players — Uber and Lyft — and Gawrelski said Tesla’s Robotaxi could mark a new challenger playing for market share. However, he said the long-term structure of the industry is what is really at stake.

Then there’s the question of how long it will take for Tesla to actually launch such a service, with Musk known to show future products that are months or even years away. Musk said during Tesla’s second-quarter earnings call in July that he would be “shocked” if the first Robotaxi ride wasn’t possible next year. But he also admitted that he had been optimistic about the timeline in the past.

Wolfe Research analyst Shweta Khajuria, who has an outperform buy rating on Alphabet, the owner of Uber, Lyft and Waymo, told BI that she expects Tesla to be several years away from reaching full autonomy.

“Ultimately, Robotaxis may pose a greater threat as Tesla puts commercial uses on the road, but Tesla is several years away from reaching full autonomy,” Khajuria said.

“That said, our analysis suggests a low-single-digit percentage drop in Uber’s profits, even in the worst-case scenario (which is likely a low-probability event), that the vast majority of self-driving does not include any Uber. partnership (like the one Uber currently has with Waymo) and most of the autonomous market share comes at the cost of Uber losing to AVs,” she added.

For now, she said the more immediate concern is Tesla’s introduction of a new ride-hailing app. With millions of Tesla drivers on the road, the EV giant has an opportunity to scale its platform, she said.

“This could put pricing pressure on both Uber and Lyft, which would be a growing threat to Uber’s growth, particularly in the US,” Khajuria said.

Uber, Lyft and Tesla did not immediately respond to a request for comment.

Conclusion for Uber? It may not be a “zero sum” game.

Wedbush analyst Dan Ives, who has a buy rating with a $300 price target on Tesla, said this is “not a zero-sum game.”

“I don’t see it as a negative for Uber and Lyft,” Ives said. “I could argue that’s a positive thing given the autonomy, and FSD would clearly benefit Uber through a Waymo partnership.”

Ives said Robotaxi Day will be a historic day for the auto industry — and will force Uber to create more partnerships.

Uber has already taken steps to further its autonomous vehicle offerings, recently announcing partnerships with Waymo and GM Cruise. In September, Waymo announced that its Waymo One ride-hailing service will be available to users in Austin and Atlanta exclusively through the Uber app. Waymo said the service provides more than 100,000 rides weekly in San Francisco, Phoenix and Los Angeles.

Uber CEO Dara Khosrowshahi has previously expressed interest in a possible partnership with Tesla.

“I don’t think it’s a zero-sum world,” Uber’s CEO said in August.

“If you look at food, for example, you have McDonald’s, Starbucks, Domino’s — every major player has a direct-to-consumer channel,” Khosrowshahi said. “But as they try to maximize the utilization of their restaurants, etc., they’ve come to the conclusion that they should work with the markets. I think the same will be true for cars.”