Tesla leaves many avenues for Uber

That was about the only certainty emerging from Tesla’s much-hyped “We, Robot” event Thursday night. The rally was ostensibly for Tesla to announce its robotaxi vehicle and related services, but the content was even thinner, with few details about the vehicle. Tesla CEO Elon Musk spent just 20 minutes on stage (after arriving nearly an hour late).

Tesla shareholders were perplexed. “That’s it? Details are unfortunately lacking,” read the headline of Friday’s report from Adam Jonas, a Morgan Stanley analyst and known Tesla bull. Tesla stock fell nearly 9% on Friday. The company plans to unveil robotaxis this year, with shares up 45% since Musk announced his plans in early April.

Uber stock, on the other hand, rose in value, rising nearly 11% by the close. This can also be seen as a correction for an overreaction. Musk’s announcement in April sent the ride-hailing provider’s stock price plummeting in the months that followed, as investors worried about the competitive threat that Uber formally spelled out in its 2019 initial public offering prospectus.

Many analysts believe Tesla’s disappointing turn of events has removed the last bit of redundancy from a company that has dramatically improved its operations and cash flow over the past few years. “A 20-minute robotaxi event ended six months of concerns about an Uber event,” Justin Post of BofA Securities told clients, adding, “Tesla’s toothless taxi is the best outcome for Uber. ,” Jefferies’ John Colantuoni said in a report.

Risk is not zero. Musk plans to mass produce Tesla’s robotaxis, called CyberCab, within a few years and sell them for less than $30,000. The idea is that private buyers turn their vehicles into businesses. “If you’re an Uber or Lyft driver today, you can manage several cars,” Musk said Thursday, promising that CyberCab’s total operating cost would be about 40 cents per mile, according to a BofA post. “This would be significantly less than the cost of an Uber driver.” Driver costs (more than $2.00 per mile) will drive industry pricing even lower. ”

But these new “fleet operators” will still need passengers to fill their fleets and generate a return on investment. The same logic has led other robotaxi operators to sign partnerships with Uber. The most notable of these is the partnership with Waymo, which is owned by Google. Parent company Alphabet already offers commercial robo-taxi services in San Francisco, Los Angeles and Phoenix, but when it launches in Atlanta and Austin, Texas next year, it plans to use only Uber’s app.

Uber has 156 million monthly active platform customers worldwide and processes more than $34 billion in gross bookings annually for its U.S. mobility business alone. Lyft, which operates primarily in the United States, reported 23.7 million active passengers at the end of the second quarter. Even if all existing Tesla owners signed on to such a service, building a new robotaxi network from scratch would be a daunting task. Tesla has shipped about 6.7 million cars since 2015, according to FactSet data.

Of course, Musk needs to actually get the CyberCab up and running first. And it’s probably even more difficult than he imagines. Building cars is one thing, but Tesla also needs to obtain full unsupervised self-driving certification in the states where it plans to sell its cars.

It’s a process that typically takes multiple years, but Musk claimed Thursday that the company intends to enable such driving in its Model 3 and Model Y vehicles in California and Texas next year. “We continue to struggle with whether Tesla can overcome the technological and regulatory hurdles needed to leapfrog the current Level 4 robotaxis,” Bernstein analysts said in a report Friday. ” he said.

There appears to be no merging traffic on Uber’s robotaxi roads at this time.

Email Dan Gallagher at dan.gallagher@wsj.com.