Tesla Robotaxis — Profit Centers or Loss Centers?

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In the past year or so, we heard all about an internal debate at Tesla about whether to exclusively pursue robotaxis or put the company’s focus into developing a cheaper and even more mass-market model than the Model 3 and Model Y. Or, well, we thought we heard all about it…. Now there’s news out that the debate wasn’t only about whether Tesla could get Full Self Driving (FSD) to true robotaxi capability, but also whether the robotaxi path actually made sense financially for Tesla!

Reportedly, there was an internal analysis that was not optimistic about this. The analysis was based around the assumption that “individuals would buy the cars, but a large portion of the sales would go to fleet operators, and the vehicles would mostly be used for ride-sharing,” and also that “many people would give up car ownership and use Robotaxis” and “Tesla would get a cut of each Robotaxi ride.” None of this is surprising so far, as it’s the vision Elon Musk and Tesla have put forth repeatedly.

However, Rohan Patel, Tesla’s former head of business development and policy who left the company last year, now tells us that “We had lots of modeling that showed the payback around [Full Self Driving] and Robotaxi was going to be slow.” WHAT?!?! This is supposed to be Tesla’s next golden goose. This is supposed to be the trillion-dollar jackpot — and not just eventually, but practically overnight thanks to the skyrocketing value of Tesla vehicles and all the money Tesla could presumably make from Tesla buyers as well as robotaxi users themselves.

“It was going to be choppy. It was going to be very, very hard outside of the US, given the regulatory environment or lack of regulatory environment,” Patel adds.

Something I’ve wondered for the past couple of years, as Tesla’s AI hardware and software costs have soared, is how much that extra, unusual cost could threaten Tesla if the company couldn’t crack the robotaxi nut quickly enough. It’s been a strongly growing cost, and it hit me that this could get unsustainable, in particular if Tesla’s vehicle sales declined (as they’ve been doing) rather than grew. Throw on less profit from robotaxis than hoped and things could get extra messy. I wonder how much that has come up in the past year in internal Tesla discussions and analyses (if they’re still allowed to do those).

However, the alternative just wasn’t acceptable to Musk — it’s too boring. “Ultimately, I think Elon is just uninterested in making a [Volkswagen] Golf-type car,” another source told The Information. “It just doesn’t wake him up in the morning. He was, ‘Let somebody else do it.’” Oy. Yes….

The Hollywood-styled Cybercab driving people all around the coolest cities in the world is much more fun, no?

People have said it for years — Elon Musk is not the person to run a mature, large corporation that needs boring management and steady growth. He is interesting in shiny projects that could be revolutionary, or could just end being a waste of time and money if they fail. Is all of that finally catching up to him and Tesla? Funny enough, I almost forgot that he originally said he’d probably step down as CEO of Tesla once they got the Model 3 to mass production. Well, that happened a long time ago … but Musk decided that no one else could lead Tesla better than him, so he just couldn’t step down. We have yet to see what the inevitable conclusion of that is.