Elon Musk’s robo-plan is all destination and no road map

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One of Elon Musk’s most consistent features is his tendency to make promises he does not keep. In 2018, for example, he vowed to launch his own brand of confectionery — a plan that, despite some trademark applications, has yet to generate sweet returns. On Thursday, the Tesla boss made a grander claim: his self-driving taxi could be in production by 2026. This latest endeavour is more credible, but not by much.

Autonomous vehicles for hire, such as the one Musk demonstrated at a live event called “We, Robot”, are almost certainly the future. Driverless cabs already ferry passengers in San Francisco, courtesy of Google subsidiary Waymo. The Tesla “Cybercab” could cost as little as 30 cents a mile to run, compared with the 81 cents it cost to operate a car in the US in 2023. Where the average car runs fewer than two hours a day, robotaxis could run 10 times that, he suggests.

Since Musk loves to throw big numbers around, here is a back-of-the-envelope idea of what is at stake. Americans drive about 3tn miles a year. If 10 per cent of that travel shifts to robotaxis, with passengers paying the roughly $1 per mile it costs to ride a city bus, there could be $300bn of revenue. At a 50 per cent operating margin, valued on the 15 times multiple of operating profit that carmakers such as Ford command, the result is more than $2tn of value.

Such figures are pure speculation, of course, but there are wilder estimates out there. Florida-based technology fund Ark Invest reckons Tesla’s value could hit $8tn, 90 per cent of that from robotaxis. Musk himself has said the Cybercab could drive the company’s worth to $5tn. That does not include any theoretical contribution from a still-in-development humanoid robot, Optimus, which Musk calls potentially “the biggest product ever of any kind”.

For now, little of that is in the share price. Tesla’s market value was $760bn on Thursday. Granted, that is 30 per cent of the value of all listed carmakers, according to LSEG. But that premium valuation owes more to Musk’s past promises to significantly increase production of electric vehicles, including the introduction of a relatively affordable $25,000 model. The shares have risen 45 per cent since Tesla announced a “robotaxi day”, but are down 40 per cent since their peak in 2021.

The scepticism is justified. Google, Amazon and General Motors are also vying for robotaxi supremacy. There are multiple regulators to be won over before rides can be hailed. Besides, Musk has a habit of being cavalier with deadlines: in 2015, he predicted fully autonomous cars by 2018. Even Thursday’s big reveal was originally scheduled for August. Investors can believe in the Tesla chief’s entertaining vision but are sensible not to stake their fortunes on it.

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