Elon Musk has declared that Tesla is now an AI company, but experts question the plausibility of this claim. Tesla has achieved remarkable success as an electric car manufacturer, overcoming the challenges of starting a new car company and making electric vehicles appealing to a wider audience. However, Musk’s recent statement that Tesla is an AI company has raised eyebrows.
In April, Musk told investors and journalists, “We are an AI robotics company; if you value us otherwise, the right answer is impossible to the questions being asked.” The company’s spending reflects this shift, with heavy investments in GPUs from Nvidia rather than new car lines. Many of these GPUs have been redirected to Musk’s social media company X. Tesla’s small and aging product lineup, except for a niche pickup truck that is only road-legal in North America.
Price cuts have not prevented declining sales, and the company’s profits are shrinking. Investors may hope to rein in Musk and refocus him on the core business. Still, stable automakers do not generate the wild profit margins or astronomical valuations that Tesla currently enjoys. The company is valued at $661.5 billion with a price-to-earnings ratio of 58.9, compared to General Motors’ valuation of $47.9 billion and price-to-earnings ratio of 4.7.
The idea that robotaxis will generate profits with minimal overheads is unlikely to be correct.
Sam Abuelsamid, principal analyst of transportation and mobility at Guidehouse Insights, points out that removing the driver adds new costs such as vehicle maintenance, charging, cleaning, insurance, and parking.
Musk’s vision for Tesla robotaxis
Companies developing autonomous vehicles face a race to generate profits before their investment money runs out.
Tesla and Mobileye pay for their R&D out of profits from current sales, but the portability of Tesla’s data aggregation from vehicles to humanoids remains uncertain. Establishing the infrastructure to support robotaxi services is a substantial challenge. This includes detailed maps, testing and certification, adapting to local driving quirks and rules, reliable connectivity, a functional ride-hailing app, and fleet management systems.
Operational challenges involve customer service, charging and maintenance depots, parking and standing spots, remote operations, and crisis management. Regulatory compliance with local authorities and collaboration with emergency services are also crucial. Experts remain skeptical about the timeline and profitability of Tesla’s robotaxi service.
The company faces strong competition from established players like Waymo, Uber, Lyft, and traditional automakers investing heavily in autonomous driving technology. While Musk’s vision is compelling, the future of robotaxis remains uncertain. Tesla’s aggressive pursuit of this technology continues to capture the imagination of investors and industry watchers. Still, the company has not provided specific dates for availability or details on how it will enhance profits.
