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After exiting the negative YTD returns at the end of September, Tesla (Nasdaq: TSLA) stock suffered a 5.6% weekly decline. Against the 52-week average of $208.56, TSLA shares are now priced at $246.23 per share. On Wednesday, Tesla delivered its Q3 production figures, producing 469,796 vehicles while delivering 462,890, making for its best Q3 period yet. Although 6.4% better than deliveries in Q3 2023, they were in line with analyst expectations of 462k range, per FactSet data.The lack of positive surprise was enough to correct TSLA pricing. However, this is just one of three major October events for the pioneering EV company. Ahead of Q3 2024 earnings report scheduled for October 23rd, Tesla’s potential fate-deciding event is set for next Thursday on October 10th. The Robotaxi event was supposed to happen on August 8th, but Elon Musk requested “an important design change to the front,” referring to the self-driving taxi dubbed “Cybercab.” With the potential to transform Tesla from a cyclical car company into a constantly revenue-generating ride-hailing service, here is what investors should know about the upcoming Robotaxi event.
Cinematic Cybercab Launch and FSD Hurdles
The fact that the Robotaxi event will take place at the Warner Bros. Discovery (WBD) movie studio in Los Angeles reveals the need for tightly controlled demonstration conditions for the Cybercab. Typically, Tesla relies on its Austin Gigafactory Texas to host big events, which is also the location where Robotaxi will be manufactured at scale.The film studio location at WBD, notable for Batman and Harry Potter franchises, should showcase Cybercab in a realistic setting. However, this will inevitably lead to speculation whether the robotaxi relies on pre-programmed settings or is it utilizing Tesla’s Full Self-Driving (FSD) tech.Although Elon Musk has been touting AI-powered FSD for years, even going so far as to say tha Tesla “should be thought of as an AI and robotics company”, autonomous ride-hailing is yet to be shown as reliable and safe. Technically, FSD still falls under level 2 driver-assisted definition according to SAE International, or at best SAE level 3.The latest version is FSD 12.5.3, which introduced the Actually Smart Summon (ASS) feature allowing Tesla vehicles to head to a location of owner’s choosing, such as from a parking lot spot to a store’s front gateway. Unfortunately, there is no shortage of videos where supervised FSD (12.3.3) makes critical driving mistakes.
Cybercab’s Shifting Chassis
To get to the ultimate SAE level 5 in a robust manner, Cybercab is a purpose-built vehicle, allowing for extra space for features that are not present in Model 3 or Modely Y. Purported reddit leak by a WBD employee showed Cybercab as a yellow two-door prototype, with most of its features masked.
Image credit: RedditInitially, Cybercab was supposed to be built entirely on the entry-level Model 2 (project “Redwood”) coming in the first half of 2025, priced under $30k in the hatchback family. The shift to a ride-hailing service delayed Model 2 “back a few months” but “allowed us to improve the Robotaxi” according to Elon Musk in Q2’s earnings call.Most recently, the US District Judge Araceli Martinez-Olguin dismissed another lawsuit related to FSD’s safety and performance. The judge recognized Musk’s claims about FSD’s potential as forward looking “corporate puffery” rather than Musk being deliberately reckless. This dismissal without prejudice was not surprising, given that the FSD disclaimer clearly stated early on that “it may do the wrong thing at the worst time.”
What Is Robotaxi’s Potential for Tesla?
If SAE level 5 is achieved with Cybercab, Tesla opens itself to new valuation thresholds. It would then generate the bulk of its income from software and services, generating predictable cash flows similar to other SaaS models like Adobe. Musk believes this would bring Tesla valuation to ~$5 trillion from the current $768.82 billion market cap.According to Musk, Tesla owners could end up earning $30,000 annually on single robotaxi fares, representing the ultimate form of passive income. Against Uber, which charges around $2 to $4 per mile, Tesla’s robotaxi fleet would be able to charge $1 per mile, with estimated operating costs under $0.5 per mile. Considering that Tesla already established its supercharging network, and Tesla’s North American Charging Standard (NACS) has become the de-facto standard, competitors like Lyft and Uber would suffer rapid devaluations in return.Moreover, there is potential for robotaxis to serve as last-mile delivery cogs in the logistics system, making them compete with Amazon. This is why Amazon too is heavily investing in autonomous driving, having acquired Zoox in June 2020 for its end-to-end autonomy software stack.Ahead of the Robotaxi event, Bank of America Securities set TSLA price target at $255 per share. Overall, 32 analyst inputs aggregated by Nasdaq place the average TSLA price target at $209.17, with a ceiling of $310 per share.More By This Author:Delta Gains Access To 9 Saudi Cities In Global Expansion Push, Stock Gains
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