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That's the title of a recent analysis by Cathie Wood's Ark Investments estimating the value of the 2030 robotaxi market. That prediction would certainly be an interesting trend, so I looked into it a bit more. The analysis by itself was a little hard to follow without the footnotes, so I linked one of those below and combined the two a bit.

ARK estimates that by 2030 the autonomous ride-hailing market could be worth $10 trillion, and that AV ride-hailing could generate $1.2 trillion a year for Tesla alone, with 63% of that ($756 billion) from robotaxi rides. Google tells me that the current ride hailing market is about $300 billion, so ARk is anticipating enormous growth in this market.

On June 22 in Austin, Tesla launched its robotaxi service to a limited group of users, beginning the shift in its model from one-time, low-margin hardware sales to recurring, high margin revenues. Now that it is scaling, Tesla should be able to meet urban Austin Vehicle Miles Traveled (VMT) with only ~200,000 vehicles, an opportunity that far exceeds today’s ride-hail market.

According to our research, Tesla’s robotaxi business could represent ~90% of its enterprise value by 2029, capturing a significant share of ARK’s projected ~$10 trillion global robotaxi market...

It is a little hard to follow some of the assumptions they are making, but essentially it seems to come down to the idea that if ride hailing were cheaper, people would use it a lot more. Which makes a certain amount of sense. Now if Tesla can capture the Austin market with "only" 200,000 vehicles, at say, $35K per vehicle that's $7 billion in capex in the next four years. Ark notes to serve any of the top 10 US cities it would require about one to two million vehicles per city, which is roughly same as global production as models Y and 3. Or roughly $35-70 billion in capex per city. Capex numbers are mine, by the way. My point here is that it will require enormous capital investment to even approach the numbers Ark is talking about.

Now, number of current ride hailing vehicles per city currently is typically in the thousands or tens of thousands in really big cities. So they are anticipating the ride hailing market will grow by orders of magnitude.

From the article:

Now that its Austin and San Francisco launches are underway, Tesla is beginning to enjoy three key competitive advantages—vertically integrated manufacturing, data, and cost per mile—that should position it to expand rapidly across other US regions.


The main flaw I see in this analysis is that Tesla doesn't actually have AV ride hailing. Tesla's ride share program requires geofencing and a safety operator. This is not conducive for rapid expansion, and the cost of a safety operator in each car certainly eliminates whatever cost per mile Ark advantage thinks Tesla will recover by operating cheaper vehicles. Ark's data argument is that Tesla has so many more autonomous miles than Waymo that Tesla simply has more information to improve their models. A problem with this thinking is that even with that advantage Tesla still doesn't have AV ride hailing, and the number of robotaxi miles is miniscule compared to Waymo. I think we can safely cross off rapid expansion as something that won't be happening soon.

In this video, the robotaxi carrying the Ark Investment analysts takes a left turn into a parking lot, but winds up blocking the road while waiting for a car to clear the driveway ahead of them. The robotaxi then inexplicably fails to drop them off at their destination, exits the parking lot onto the public road, re-enters the parking lot, and drops them off as intended.

https://www.youtube.com/watch?v=anAYGAwOnWQ&t=1945...

In this video, a different robotaxi with a different Ark Investment analyst gets confused trying to enter the same parking lot. After a quick check-in with HQ, the safety operator gets out and moves into the driver's seat, and drives the car manually in the parking lot.

https://youtu.be/RnrgVkoj334?si=vxb-htZw5V7sjDWU&t...

I think Ark Investments is drinking their own Kool-aid. I think they got the trends and timelines wrong.

https://www.ark-invest.com/articles/analyst-resear...

https://www.ark-invest.com/articles/valuation-mode...

The main flaw I see in this analysis is that Tesla doesn't actually have AV ride hailing.

That, and the unreasonably low cost per mile they use for autonomous ride hailing. I at least understand why they think the Cybercab will have a very low cost for the vehicle compared to, say, Waymo. Optimistic, to be sure - but you can at least articulate why Tesla might have some low cost magic that would let them deliver a $25K vehicle. But I have no idea how they got to such a low cost of operations, insurance, finance, and maintenance.

That, and the unreasonably low cost per mile they use for autonomous ride-hailing. I at least understand why they think the Cybercab will have a very low cost for the vehicle compared to, say, Waymo. Optimistic, to be sure - but you can at least articulate why Tesla might have some low-cost magic that would let them deliver a $25K vehicle. But I have no idea how they got to such a low cost of operations, insurance, finance, and maintenance.

Al,

Where are the Chinese manufacturers with FSD for AV? If TPTB let China or India flood our market with lower-cost AV, good luck TSLA.

Where are the Chinese manufacturers with FSD for AV?

Denied access to the US due to "national security".

I see a number of challenges with the assumptions:

1) Tesla is no longer the world's leader in EV's or in autonomous software and its market share will likely erode in the future.

2) Major cities around the world frequently have robust mass-transit systems and, even with the current availability oof manned taxis and car-share, locals find it more cost-effective to take the bus/subway. While this is likely similar in cities like Paris and Zurich, I'll address NYC. With a nighttime population of 8.5 million and about 12 million during the day, and with a relatively affluent population with over 400,000 millionaires (despite rumors to the contrary, showing a large post-COVID increase in residents), New York City has only 13,587 yellow medallion taxicabs (though it has quite a few car service and ride-share cars).

3) In the world's most populous, but poor, environments (e.g.: India), taxis are so cheap that even poor locals use them instead of purchasing cars, etc. While there is a "taxi culture", there is no profit in the system. The hierarchy is Air-Conditioned cab, taxi without A/C, tuk-tuk, motorcycle taxi (depending on number of people traveling and what they are lugging with them). It's hard to see how autonomous taxis can compete with drivers earning $2-3 a day.

4) In affluent environments which are lacking good mass transit, such as the rural and suburban US, there is a perceived value to owning a car as goods and services tend not to be located close to housing in rural areas.

Unless and until the US and European population is willing to give up car ownership wholesale or the competition in third-world countries becomes much more expensive, auto-taxis may continue to be a pipe-dream in many areas as a profitable business.

Jeff

4) In affluent environments which are lacking good mass transit, such as the rural and suburban US, there is a perceived value to owning a car as goods and services tend not to be located close to housing in rural areas.

In the more suburban areas that are serviced by bus, there is a trend towards minivan transportation for the area the bus doesn't go to. We can call the van via ap and pick it up at the end of our street, a street which is considered so inconsequential that the snow plows don't even bother with us until it is much to late and the now packed ice can't be removed by anything other than a change in temperature. The minivans have essentially expanded the use of the bus system by bringing people closer to the bus line, which is the eventual discharge area. I confess, however, that we have not used it, even though it is still currently free. We Americans love our cars.

Right now we are in Montreal, and loving the walkable nature of the city, with our car safely tucked away in the garage below our vacation rental. Our excursion today will take us beyond physically walkable, but we will likely just take the Metro.

IP

Right now we are in Montreal, and loving the walkable nature of the city, with our car safely tucked away in the garage below our vacation rental.
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I live in NYC and own a car. It is generally berthed in a rented garage space below our building and taken out a couple of times a week (to go to Costco and to make the "shopping rounds" as my wife likes to cherry-pick the loss leadeers at mulitple supermarkets). Once in a while, we use it to head out of the city on some mission or another. Could we save money byu using rentals for the occaisional out-of-city runs and using a car service for the few Costco runs where the size/weight doesn't lend itself to the subway? Sure (when you figure in garage rental, insurance, gas, maintenance, fees, etc.), but it's convenient to have it hanging around. That said, every time my wifee suggests I replace it with a newer model, I patiently explain that it hasn't been used up yet and I want my next car to be an autonomous model.

Jeff

Our son graduated from GA Tech and stayed in Atlanta. When he graduated, he simply figured he would have to buy his first car. I suggested he run the numbers from your post, "(when you figure in garage rental, insurance, gas, maintenance, fees, etc.)," and he saw the light. Work paid for a rental when needed for work and Uber/delivery took care of the rest. 10 years later, he is trying to cling to the car-less lifestyle, though his desire to buy a house may trigger a different economic conclusion, as properties further out tend to be cheaper than in the city.

It can be hard to think outside the box you know, even if that box is that of your parents and not directly related to your situation. Happily, thinking outside the box is a passion and a talent of mine.

IP

I suggested he run the numbers from your post, "(when you figure in garage rental, insurance, gas, maintenance, fees, etc.)," and he saw the light. Work paid for a rental when needed for work and Uber/delivery took care of the rest. 10 years later, he is trying to cling to the car-less lifestyle, though his desire to buy a house may trigger a different economic conclusion, as properties further out tend to be cheaper than in the city.

I have seven nieces and nephews. Every single one of them started out being a “no car” person. A couple didn’t even get their drivers’ license. Flash forward 10 years, 6 of the 7 are married. 5 of the 7 have children, and (surprise!) all have cars. So do the other two without cars. Every married couple has two cars, the single mom has one, and the two singles have their own.

They may have put off having cars a few years longer than our generation, but they are car buyers. They have also, with one exception, moved out of urban centers and into suburban properties. They used to have mass transit or Uber/Lyft, now they have their own cars. I suspect that having Robotaxis available is not going to change their need for “owned” automobiles, although I can see that they might use a robotaxi to send the kids to karate practice once in a while or whatever.

Very few outside densely packed urban areas are going to give up their cars. Heck, my condo in Boston was next door to a fraternity (both sides, actually) and when I was back in July the parking lots were as full as ever. The behavior might be shifted a few years or something, but “ownership” is going to be around for a very long time.

Unless and until the US and European population is willing to give up car ownership wholesale....

That is the theory, as I understand it. Folks like ARK believe that pure AV TaaS will be so much cheaper than operating a privately owned car that people will give up car ownership wholesale. They think that these things will be so much cheaper that people will make that switch.

Personally, I'm highly skeptical of that. The main costs of owning a privately owned car are the costs of operating the car: depreciation, maintenance, fuel, insurance, and repairs. It costs just as much to operate a privately owned car for (say) 15K of miles in a year as it would to operate a TaaS car for those same 15K miles. TaaS vehicles save money on the costs that accrue when the car isn't being used - almost entirely financing and parking costs. But those aren't going to be enough to fundamentally reduce the overall cost per mile for anyone other than infrequent drivers, especially since TaaS cars have their own expenses that privately owned cars do not (like deadheading and the monetized cost of cleaning and upkeep).

The real question is whether TaaS gets cheap enough to be a solid "second car" replacement. It will likely never be materially cheaper than a privately car that's driven 10-15K miles per year - but it might be cheaper than a very lightly driven car.

That is the theory, as I understand it. Folks like ARK believe that pure AV TaaS will be so much cheaper than operating a privately owned car that people will give up car ownership wholesale. They think that these things will be so much cheaper that people will make that switch.

In addition to the assumption that the vast majority of people will be using AV TaaS, AKR had another assumption that a big percentage of the remainder who own their cars will be willing to loan them for rideshare during peak times. I don't think that's a good assumption at all. If you own a car you will most likely be driving it during peak times.

Now, this might make sense if you have lightly used second car that is available to be loaned out. But those are the vehicles TaaS will eliminate first. I simply don't believe their assumptions. In fact, their conclusions are wild enough I wonder if ARK even believes them.

In related news, Elon posted on Twitter today that the robotaxi safety driver should be eliminated by the end of the year. That clearly won't happen for regulatory reasons alone. But the responses are very interesting. There is a bit of skepticism mixed with an outpouring of gushing praise and excitement.


https://x.com/elonmusk/status/1963637208490856928

In addition to the assumption that the vast majority of people will be using AV TaaS, AKR had another assumption that a big percentage of the remainder who own their cars will be willing to loan them for rideshare during peak times. I don't think that's a good assumption at all. If you own a car you will most likely be driving it during peak times.

That assumption actually isn't an especially bad one. Most people who own a car will want to use it for at least one round trip during peak times. But the "peak" that ARK identifies is basically the whole of daylight hours. If you need to use your car to commute to and from work, it's still going to be unused for virtually the rest of the day.

I think they're assuming that robotaxis will look like Uber/AirBnB - and perhaps follow the evolution of those platforms. The assumption is that there's lots of spare unused capacity with existing capital (unused rooms and unused cars) which has a very low marginal cost to be utilized, if you can get over the transaction costs. Which is how those platforms started. Over time, though, the users become less people using low marginal cost "sunk" capacity but instead "professional" folks who are acquiring capacity for the purpose of putting it on the platform: in later stage "sharing" systems, the advantage comes not from using an otherwise sunk investment but in not having to follow many of the rules that incumbents have to follow.

So ARK's vision is that Tesla actually succeeds in getting existing Model Y's to autonomy, which means there's a vast surplus of cars that people already own that they can throw into the pool during the first phase of adoption. As it matures, you'll get people who are buying Cybercabs or used Model Y's for the purpose of putting in the pool - but they'll have access to free parking (and possibly free charging) that lets them push enough of the operating cost onto someone else for this to be a viable business model.

I don't think that's at all likely - I think that a viable robotaxi will require hardware and vehicle capabilities that existing Model Y's lack - but I think that's the theory.

there's a vast surplus of cars that people already own that they can throw into the pool during the first phase of adoption.
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According to the Great Yogi, "In theory, there is no difference between theory and practice -- but in practice, there is".

On paper, that's wonderful idea, but human nature works against it - and the wealthier the human is (such as many Tesla owners), the less important the potential incentive. People become very attached to things which they bond to their ego and are reluctant to lend them out unless the need for money is strong enough to make them compromise. Despite having significant unused time available, items like cars, apartments, spouses, dogs and so on may require significant psychic upheaval to rent out on a contract basis despite their value to maximize cash flow.

Jeff

On paper, that's wonderful idea, but human nature works against it - and the wealthier the human is (such as many Tesla owners), the less important the potential incentive. People become very attached to things which they bond to their ego and are reluctant to lend them out unless the need for money is strong enough to make them compromise.

I agree, but I don't think that will be an obstacle at all - because I think there will be plenty of owners who just shift the mental "basket" they put their Model Y's into. These cars won't continue to be the cars that are their car. They'll be their side hustle business car. It's the thing that earns them money, that puts them on the bleeding edge of technology, etc.

They'll have a different car that's their car - perhaps another Tesla, perhaps paid for with the money they earn from their "working girl" Model Y. That different car is the one they'll bond to their ego, the one that's theirs alone that they won't lend out. They're not sharing that car. The robotaxi car is their business car, their former car, the one they still own but don't use themselves.

I suspect the bigger obstacle would be cleaning and maintenance, which higher-income car owners won't want to regularly engage in. But at the beginning, when the model is just soaking up excess unused capacity, Tesla may be able to economically provide that as an "end of day" service.

People become very attached to things which they bond to their ego and are reluctant to lend them out

They will not be given a choice--by Tesla. It is very easy for them to do it. Tesla can refuse to update the vehicle's software unless the owner agrees to allow the vehicle to be used in the public fleet when needed. If the owner refuses, they are knowingly refusing future updates/upgrades to the vehicle-including any needed upgrades to hardware on the car paid by Tesla.

They will not be given a choice--by Tesla.
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Ah - but they have a choice whether to buy Tesla. People know that they can buy a Chromebook for between $150-$250 in consideration to be beseiged by Google advertising, but the vast majority of people elect to purchase equivalent laptops (from a performance standpoint) for substantially more money to avoid being in Google's clutches.

In order to gain the level of access you are suggesting, I suspect rather than strongarm their customers, Tesla will be forced to sell (or lease, more likely) cars at a substantial discount which amounts to sharing the benefit with the primary custodian of the car.

Jeff

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