The fleet wakes up with an over-the-air
update. That's all it takes. Let's talk
about the radical idea that when Tesla's
Robotaxi network goes live, Tesla will
stop selling cars, will keep them for
themselves, and run the Robotaxi network
itself. Are you ready? Let's go! What is
the net present value of a Robotaxi? On the
order of a couple hundred thousand
dollars? First we'll look at the lifetime
economics and annual economics of a
Model 3 or Model Y Robotaxi. Then we'll
compare the prospect of Tesla selling
Robotaxis, and how that will turn out
for them for profits, versus Tesla
keeping the Robotaxis themselves and
operating the Robotaxis themselves. At
the end we'll look at comparing
Model 3 or Model Y Robotaxis versus
single-passenger pod car Robotaxis, and
see which version of that makes more
profit for Tesla as well. We're looking
at a future with Tesla Model 3 Robotaxis
that are capable of 1 million
miles of driving life - 1.6 million
kilometers. We would expect that Robotaxi
would be at 500,000 miles out of
that million miles or
800,000 kilometers paid. I think it
might be closer to 600,000 miles
or 900,000 kilometers
but you get the idea. And we
would see a lifetime - over that lifetime -
$1 a mile in revenue or 62 cents a kilometer,
for 500,000 or 600,00 dollars in revenue for the life
of that vehicle. Where does that dollar a
mile come from? Well it's pretty
conservative when you realize that Uber
and Lyft are getting about $2 a mile and
while over the long haul a saturation of
the market with Robotaxis would reduce
the cost eventually, for the short to
medium term - probably the next 10 years
or longer there won't be enough
Robotaxis to satisfy all the demand, and
so $1 a mile is probably a conservative
price as Elon explained: There's like on
the order of 2 billion cars and trucks
in the world
so Robotaxis will be in extremely high
demand for a very long time. Probably $1
is conservative for the next 10 years.
Next we need to look at cost per mile.
It seems reasonable that a Model 3 or Model Y
would have a roughly 15 cent per mile cost.
Or 9 cents per kilometer. Which would
add up to 150,000 dollars
over the course of its million
mile life. That 15 cents a mile
might sound low, but the company Tesloop
is already running Model 3s and
estimates its cost per mile as low as
18 cents a mile. That's with a
500,000 mile life for the
vehicle when we are expecting the Model 3
Robotaxis to last a million miles.
So combine that, and with future lower
cost of production and more efficiency,
it's very reasonable to see Tesla Model 3
and Model Y Robotaxis getting as low
as 15 cents a mile. That's 15 cents a
mile in operating cost. Looking at it on
a yearly basis, if your Tesla Model Y or
Model 3 Robotaxi does 100,000 miles and
60,000 of those miles are paid - I think
that's about the right numbe, Some say
50,000 but let's go with 60,000.
Then you're looking at 60,000 dollars
in revenue a year for your Model 3
or Model Y Robotaxi. At 15 cents a
mile your cost over 100,000 miles
is 15,000 dollars. That
leaves you with 45,000 dollars
in profit on an annual basis.
$60,000 minus $15,000
equals 45,000 dollars. Elon
did a similar calculation at Tesla's
Autonomy Day presentation. He came up
with slightly different numbers but
we're in the same ballpark. What
would be the probable gross profit from
a single Robotaxi. We think probably
something on the order of
30,000 dollars per year. So in
nominal dollars that would be
a little over 300,000 dollars
over the course of 11 years,
Might be higher.
I think these "consumptions" are actually
relatively conservative. And this assumes
that 50 percent of the miles driven
are not useful. So
this is only at 50 percent utility.
This gets us to the first big idea.
Most people think Tesla is going to
continue selling cars to customers.
I think we're going to see Tesla decide to
stop selling cars to customers, keep them
themselves, run them as Robotaxis and
just live off the profit from the Robotaxis
themselves. I believe this is going
to be more efficient. There's less
transactions cost. There's all kinds of
reasons for it. I know it sounds crazy but
listen to what Elon said at Autonomy Day,
and tell me that doesn't sound a little
bit like what I'm talking about. In our
own fleets, I don't know, I guess, long term
we'll have probably on the order of 10 million
vehicles. Tesla is planning on
having 10 million of its own vehicles.
Did you hear that? We made an important
change to our leases. So if you lease a
Model 3, you don't have the option of
buying it at the end of the lease. We
want them back. All the leased Model 3s
and Model Ys are coming back
and Tesla's going to keep them.
They're not going to sell them. Any locations
where there's not enough supply for
sharing, Tesla will just make its own
cars and add them to the network in that place.
Tesla is going to make its own
cars and add them to the network itself.
There's basically two scenarios. Tesla
can continue doing what it's doing now:
Selling the cars and getting a lot of
cash up front, and then once the
Robotaxi network goes live, Tesla would earn
a percentage from the Robotaxi operation.
Additionally Tesla wouldn't
have an operating burden. Tesla wouldn't
have to own and maintain the cars
themselves. That burden would fall upon
whoever buys the car. They would
have to take care of that themselves.
With the alternative that I'm talking
about, Tesla doesn't get cash up front
from a buyer. But they get recurring
revenue - greater recurring revenue.
Instead of earning a percentage from the
Robotaxi Network, they get everything.
Transaction costs are reduced because
they don't have to worry about the
marketing of the car, the process of
selling the car, the taxes involved in
selling the car. And although they have
to operate the network and own the cars,
they would have economies of scale in
that operation because they're doing
such a high volume of it. Just to be
clear about this there are two big
advantages for Tesla keeping the
vehicles that should be obvious right on
its face. First the transaction cost for
Tesla to keep the car versus selling it
should be lower or effectively zero, by
comparison to the cost of selling cars
to consumers. No marketing. No showrooms.
No test drives. Much much easier
and much less expensive. At the
same time - the operating economies of
scale. If you or I own a Robo taxi and
we have to take care of wiper blade
replacement. And we have to take care of
charging. And we have to take care of all
the other - even though there's not a lot of
maintenance, they're still some maintenance
we would have to take care of. Tesla
we'll be able to do that more
cost-effectively because they'll be
doing it at such a large scale. If you
take those two things into account, it
should lower Tesla's cost per mile to
maybe 10 cents a mile instead of 15
cents a mile for you and me. Not huge in
the end but it matters. Let's look at a
single year of production for Tesla.
Assume Tesla makes 1 million cars. Assume they could sell the cars for $100,000.
And that they cost $30,000 to produce.
And assume there's a $5,000 transaction
cost in the sale between marketing and
all that. Now I know in particular that
100,000 dollar assumption of
the sale price may sound controversial.
Elon has said they might sell for $200,000. It's very hard to put
a number on the sales price. It really
depends what share of the Robotaxi
revenue or profit is the vehicle owner
getting versus what Tesla is getting.
The most common number I've seen is that
the owner gets 70% of the revenue. Well if
the owner is only getting 70% of the
revenue, then the value of the car to the
owners a lot less because their cost is
still high, and it dramatically cuts into
that owners profit. When we get to the
end you'll see that although it matters -
Obviously if it sold for $200,000 it would
be a much bigger result for the sell side.
But at the end, I think you're going to
see it really wouldn't make that much of
a difference. And the argument for Tesla
keeping the cars would still win out.
So let's take a look at one year production
and how that will play out over the
years of that fleet of 1 million cars. On
the sell side that first year you get
65 billion dollars of profit on sales for
Tesla. Add to that $18,000 a car of
Robotaxi share at 30% of $60,000, gives
them 18 billion dollars in Robotaxi
revenue for 83 billion dollars of profit
in that first year for the sell approach.
If Tesla keeps the cars they
get 50,000 dollars in profit per car
for 50 billion dollars in profit in
Year 1. So at the end of Year 1
the sell side is well ahead at 83 billion
dollars in profit versus
50 billion dollars in profit. It's the
remaining years that really help the
keep version win out. Because you
continue making 50 billion dollars in
profit a year on that revenue. Where
on the sell side you're only making
18 billion dollars of profit a year on that first fleet of a
million cars. So while you made a big
chunk of profit on the sales in the
first year, and you could even double
that profit on sales in the first year -
You still wouldn't by the end of ten
years keep up. But assuming it's
100,000 dollar sales price, the
keep approach actually gets ahead of the
sell approach in only 3 years. So in
the keep approach Tesla ends up making
500 billion dollars in profit
over 10 years versus 245 Billion dollars
in profit over ten years on the sell approach.
So the keep approach is winning by a long
way. I should add this doesn't account
for whatever residual value those model
three Robo taxis have left at the end of
that million mile life I don't think
that'll be a significant factor but it's
entirely possible that they could be
reconditioned for a small amount and
sent back out to keep making more money
I also want to make my pitch here for
why I think Tesla will make pod car Robo
taxis single passenger Robo taxis
instead of regular model three model y
style Robo taxis it's not gonna be that
obvious on the first slide but let's
look at this suppose the cost per mile
of a Model 3 model while Robo taxi works
up to ten cents a mile that's ten
thousand dollars a year in cost and
let's say 50 thousand dollars a year in
profit on that sixty thousand dollars in
revenue we talked about now turn that to
the pod car if you get the cost down to
four cents a mile you're not making that
much more a year you're making fifty six
thousand dollars a year instead of fifty
thousand dollars a year that's something
but it's the next slide that's gonna
show you why it really matters why the
pod cars will make Tesla's so much more
money this is where it's big the regular
model three Robo taxi will have a 50
kilowatt hour battery pack you can make
a million of them a year and make fifty
billion dollars a year in profit with
the pod car you don't need as big of a
battery pack you can do 10 kilowatt hour
battery packs and make 5 million of them
a year and you'll make 280 billion
dollars a year in profit the big deal
here is that Tesla has been battery
constrained for a long time and that
battery constraint is likely to continue
no matter what happens at battery day
there will always be battery constraints
and if they make pod car Robo taxis
they'll be able to make far more of them
reach far more of the market and still
get a dollar a mile while having much
lower cost per mile and be able to make
more of them and that's why Tesla would
make more profit making pod car Robo
taxis than regular Robo taxis and
keeping them instead of selling them
what do you think you think Tesla will
keep selling cars to people or do you
think what I'm saying makes sense and it
would be crazy for Tesla to sell cars to
people when they can keep them and make
more money on them just running their
own Robo taxi network let me know in the
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how can Tesla do better than what I
proposed here let me know what you think
and thank you very much for watching
