If a Tesla Cybercab fleet were profitable, Tesla wouldn't sell you one
electrek.co
electrek.co
That's what this is. You take on operating costs and you understand your local market. They own the brand.
For the Cybercab, Tesla is the one operating it via "Full Self Driving", their app, and the Tesla rideshare network. As the owner, the only thing you do is own it, insure it, have a place to park it, and take on the risk of what happens if the vehicle registered to you is in an accident. Clearly, a pretty one-sided assignment of risk.
You need to clean, inspect, repair, insure, secure and charge the cars. To do so efficiently you will need to custom develop premises full of chargers and efficient charging and cleaning infrastructure.
That absolutely is operationally intense. Premises, permits, construction and then significant operations.
It's not an exact 1:1, but that seems to be the model here. Tesla does the things that can scale (FSD, manufacturing, etc.) and operators do the things that can't.
Another really important issue is depreciation. You own the car for a few year and eat a cost of depreciation, and then figure out how to dig yourself out of the hole the way Hertz did. Similar to iPhone- you use one for 2+ years and then get a new version- you're also responsible if the phone breaks.
Also if Elon Musk has a demonstrable superpower it's the ability to raise capital. So they really could order 100,000 of these themselves.
His revealed preference is to run things centrally and at massive scales.
Doesn't Tesla operate its own dealer network?
Precedent for this?
I don't know if Tesla has proven that their own fleet is successful.
From what I understand, McDonald's franchisees can make 5-15% of gross revenue of their location. That's a decent return, along the lines of other investments. As with all investments, you may lose too.
They are much more than McDonalds.
But indeed your comparison is an apt way to reply to this "article".
Selling a car today gives Tesla the full profits of that hardware production today. Running that car as a robotaxi means that Tesla eats the costs of the hardware today in exchange for a larger total profit collected over several years.
So operating a fleet gives the company access to more long-term profits at the cost of decreasing the bank balance today (negative cash flow), where selling the cars lets the company fill the bank account right now (positive cash flow) at the cost of limiting long-term profitability.
The decision to prioritize immediate cash flow vs long term profits depends on the financial position and overall strategy of the company.
Any franchisee contract would also need to have some sort of rules that prevent Tesla from running their own taxis themselves and undercutting their business, if it turns out to be too successful.
nope - this is just Elon raising money without going to the stock market or government but directly to Elon worshipping idiots.
he benefits two ways - interest free Capex, then higher stock prices by reporting higher number of cybercabs on the road. & guess who takes a punch to the mouth - the Elon worshippers.
with the amazon model | franchise models there's shared risk - not exactly equal but shared risk.
with Elon - one person is eating the risk, while one person eats 90% of the gains.
If McDonald’s restaurants were profitable, they wouldn’t sell franchises. Except it’s been an incredibly successful way to raise capital and expand, for both franchisees and McDonalds.
If company about to IPO were a great investment, they wouldn’t IPO. Except the stock market has been an incredible mechanism for company and capital growth.
Taxis are a tiny niche in the transport market. They're certainly very profitable for the small number of people who run the companies, but they're a tiny niche and they will always be that way. There are too many advantages to owning your own personal automobile when you drive a lot. In turn, people who are driving their own automobile vehicle are the target of all car companies, taxies are an important niche but that is not enough to make a successful car company.
Let’s consider the only major example of the alternative: Waymo. Waymo is expanding rather slowly, and I imagine there are several factors. Building the cars is capital intensive. Adding a new market requires some regulatory work, and it also requires acquiring and building a lot for the cars to park at and charge at. And hiring people to charge them. (The labor cost is a drop in the bucket — there is no reason to put serious effort into automating this.)
Perhaps Tesla wants to focus on its actual strength: building the cars. And perhaps they want to outsource the regulatory issues and the problems when all the cars get stuck in the same power outage, etc.
(I’m charitably assuming here that Tesla can actually build a viable robotaxi.)
They allow 3rd party sellers in their platform and in their warehouses
There's many reasons for this but they include:
Somebody will compete in every segment: building the taxis, operating them, and vertically integrating them. Put another way - some people will buy taxis in this model either way, so Tesla is incentivized to participate in this also. That helps them get economies of scale.
It also of course minimize risk. But not just the obvious kind. It also minimises risk of a niche competitor taking the buy to own robotaxi market and from that wedge becoming a substantial competitor.
But also like Amazon - operators should worry about Tesla taking the data they have about most successful routes and using that to compete directly in the must lucrative identified markets.
My guess is the insane liability a car accident can create. Trucking companies have had to pay out millions, even for accidents where they weren’t at fault.
The fact that robot taxi's won't form a union makes this rather unlike Amazon DSP's. I suspect the article is correct. There simply aren't net profits here for operators.
Why would anyone other than a fool agree to indemnify Tesla against liability for a vehicle whose driving behavior is controlled by Tesla?
The issue is that they’re rolling it out before Tesla’s self-driving software has been proven to be safe. And there are questions about whether a vehicle without a steering wheel or side mirrors is actually road-legal.
Additionally, I’m not sure what kind of checks Tesla is doing for the franchisees. Will they let them roll out a service anywhere they like, irrespective of whether FSD is optimized for those road conditions? Based on the way they’ve approached FSD with consumers, my guess would be yes.
What exists is a web page where you can express an interest in that offering.
But you can't buy a cybercab today.
This whole article is much ado about nothing.
Tesla has a page to gauge interest in something they might offer at some point in the future.
That's it. That's all there is to it.
The scalability point is compound. We are talking charging, storage, and cleaning infra as well as regulatory burdens. Scaling that is hard and local, so it does make sense to outsource that. I believe the deal is really raw because of the risks involved, but Elon does have a decent track record of delivering on investment. Some of these entities will be able to perform regulatory capture and become a decent cash cow.
By 2024 they had begun dumping the EVs and reported a $2Bn loss as a result.[0]
The HTZ stock price has fallen 90%.[1]
Somehow TSLA is still trading in the neighborhood of that 2021 peak. Currently trading at a PE ratio of over 300, despite declining revenues[2].
Really wish I understood the Elon Musk voodoo.
[0] https://www.cnbc.com/2024/01/14/hertz-makes-agile-decision-t...
[0] https://en.wikipedia.org/wiki/List_of_predictions_for_autono...
Take the Tesla metal casting advance (single-press casting, or as Tesla calls is "Gigacasting"): it is mostly the result of investment, more specifically all other carmakers deciding they weren't willing to risk it, no matter how many papers said the simulations were correct. Tesla risked it, it worked exactly like the (mostly German made) theory and simulations said it was going to work, and now everyone and their mother (ie. even non-car companies) are using it. Result: Tesla has a patent on it, that nobody has licensed since they were working on it decades before the first Tesla engineer thought of it. The idea was literally available in CAD software before Tesla started to work on it (not that I want to claim there wasn't a LOT of design + validation + testing + integrating + ... work left to be done)
This principle is generally true for all Elon Musk companies, and most of their accomplishments/vision. SpaceX is not even close to the first to land a rocket, for example (that was McDonnel-Douglas). Nor were they the second, or the fifth. Oh and only one of the companies that attempted it before SpaceX needed 2 tries, all others succeeded immediately, or the company died, some succeeded, and the company still died. SpaceX, by contrast, needed 7 crashes before succeeding for the first time (one of their rockets never tried to land on account of blowing up during ascent, I'm counting that one), and 17 tries before they first tried to move it to production.
I'm not to say integrating everything, massively expanding the scope/scale of these applications, getting the investments, and getting it commercially operating isn't a gigantic accomplishment, but it is not inventing it at all.
Elon Musk's constant talk about inventing and "work from first principles" ... is therefore kind of total bullshit. He has never done that, and neither have his businesses.
Would you like to pay for the privilege of using our network, with hardware you buy from us, in order to subsidize our costs of running that network for ourselves so our cost turns into a profit, so we can then compete with you on that same network?
He must have been having lunches with Bezos.
Essentially shift maintenance cost to the investors (all of it since in this case there are no drivers to share part of the cost).
Skeptical it will work as advertised, though.
[1] https://www.consumerhealthdigest.com/health-supplements/tesl...
even to date after scaling to millions of units sold
Waymo didn't even bother dealing with any of the small cities in the San Francisco Bay Area, they worked directly with the state of California in order to expand their service area.
I bet his draft folder has a doc with the title “if US treasuries were profitable, US gov wouldn’t sell you one”
Uber doesn't buy the cars because it's not profitable.
They let the driver eat the depreciation, assume the capital risk, and deal with lemons and accidents.
No one drives Ubers thinking they're going to get rich, and I sure don't see companies buying up vehicle fleets to put into service on Uber.
Because it's a money losing proposition.
Why do you think Tesla is trying to also offload it onto suckers?