In case you didn't quite interpret the earnings call, it was basically said that rather than
think about a low cost Tesla to buy, think about a low cost of transport.
Elon literally said they are not currently working on the $25,000 car.
He says at some point they will work on it, but was vague, and said that Tesla have enough
on their plate right now.
He then goes on to point out, it's not the fact that it's $25k that matters, it's autonomy.
As autonomy increases the utility by 5 fold.
A $25,000 Tesla just reduces the price of an entry level Tesla by 40% or so.
Autonomy will do so much more for EVs than a $25,000 Tesla.
Due to what sounds like the likelihood of FSD coming soon, Tesla has run some numbers
and worked out the average difference in cost per mile in a compact Tesla as a Robotaxi,
over the lifetime, between a model 3 or model y, is perhaps 1c a mile.
If for example the compact is $10,000 lower cost than the Model 3, over 1 million miles
it really is the difference of 1c a mile.
But then on top of that, just having only the one, or 2 models, to make adds further
to economies of scale.
Remember the model 3 and model y share a lot of the same parts, a compact model would share
fewer.
At the end of the day, it's clear Tesla have done the same numbers as us, as to the profitability
of Robotaxis.
This is where the money is at, this is the priority.
Even if its just one market, it is so profitable.
But when that one market is your home turf, it gives you an advantage.
In addition to that, the one market also happens to be the richest country in the world, and
Tesla's biggest customer, where Tesla are building their biggest factory, where Tesla
have progressed the furthest with FSD, where Tesla have the most data on FSD.
So the added stress and hassle of to also add a compact model into the Robotaxi fleet,
when the 3 and Y are already at a low enough cost, cheaper than the bus.
Of course the bus is highly subsidized too, it's significantly cheaper than the overall
cost of a bus.
Therefore perhaps buses will be removed and replaced with vouchers for robotaxis for people
who need them.
Oh but wait in Europe, all the roads are so narrow, so you probably do need a smaller
taxi.
Well I don't think so, when I was in Rome, all the taxi drivers were in E Class Mercedes.
Besides an electric car is more spacious for the same size, due to not having to have an
engine in the front.
If the prices are not low enough you can factor in car pooling, the price becomes very low
indeed, which is why it is going to be so incredibly valuable everywhere.
But of course starting in the US, and pumping out millions a year just from Texas, before
long.
Whether Tesla will still sell them to the public is the question, and if so, will Tesla
sell them for a reasonable price.
Will Tesla vehicles increase in price significantly?
Will Tesla double the prices?
Will FSD become subscription only.
Will Tesla make a large divide between people who can afford their own Tesla, and people
who have to Robotaxi?
Will it be a big deal to own your own Tesla, due to so much appreciation.
Or the fact that you are willing to use your Tesla personally, at the opportunity cost
of perhaps $25,000 a year, that you would have earned in the Robotaxi network, had you
included your car.
I know a lot of people say, that they would never let their car out in the Robotaxi fleet,
but if you can pay it off in a couple of years, then it's something to think about.
Perhaps some people will buy one, place it into the the fleet for a couple of years,
and then pay it off, and keep it for themselves.
A free Tesla earned after 2 years of Robotaxi maintaining
Hardly anyone has gotten their heads around this pivot Tesla have done.
Tesla are not much longer an EV company, they are going to be selling AVs, cars that drive
themselves.
And on top of that the Robotaxis.
This is much more important to Tesla than making a Cybertruck too.
They can make these new Model Ys at such a rapid rate there aren't even enough batteries
available to keep up with them.
Perhaps when ordering a robotaxi you can choose between a model Y and a model 3, and maybe
a Y is an extra 5c a mile or something.
I would hope that there are also Model S and Xs available, for when you want something
more luxurious.
Although, the life on an S and X will be a lot shorter than on a Y and 3, before battery
degradation.
At this stage, it doesn't appear that there may be a $25,000 compact Tesla, may not be
necessary to the mission.
The mission is transition from fossil fuels, not make sure everyone can afford a Tesla.
But there may still be a compact Tesla, I just wouldn't expect it any time soon, or
expect it to be a priority.
It was thought of as to be the Robotaxi, or affordable EV, and will take Tesla's demand
to the next level.
Except Tesla appear to have reached this level of demand just with Model 3 and Y, and especially
with the addition of FSD.
Eventually when Tesla start making cars for consumers, rather than Robotaxis or FSD, then
we might see a compact Tesla.
But I would expect to first see a plethora of other types of vehicles, that would carry
a higher profit margin.
I would also not hold your breath for a $25,000 price tag from the Tesla.
Although I may be wrong, as the real cost may end up being FSD anyway.
Perhaps the low price tag is necessary, to get everyone on to transport as a service,
paying for FSD each month.
The 4680 batteries may be great for Robotaxis too, likely 1 million miles before noticeable
degradation.
Yet also longer range.
Which I would expect to see in the future Model 3 and Ys suitable for Robotaxis.
No one can predict the future, not even Tesla or Elon Musk.
They may have set out to have all these plans for Tesla, but when they get there, they need
to re-evaluate and work out what's happening here.
Tesla is at its core a tech company, and tech moves at rapid rates.
For example battery technology advances, can make you rethink strategies, and of course
software advances, then all the exponentials on top of that.
If Tesla are solely focusing on the US for FSD, and will crack it very soon, then perhaps
as early as 2023, or 2024 there could be Robotaxis.
This may not my own personal belief, but it feels like Tesla believe this.
We will have to see, but what about all the regulation you might say.
Well what about this, what if this Robotaxi industry in the US alone is worth $10 trillion.
I think a potential $10 trillion will have quite a bit of energy in getting things done.
Of course not to mention the unequivocal evidence of how many lives it has saved.
How much value was the compact Tesla going to add?
If it was $25,000, perhaps the gross margin had to be lower due to getting costs down
so much, maybe about $7,500 profit per vehicle, without FSD, compared to likely $30,000 for
a Model Y.
Also this product will cannibalize Teslas other products, which currently have no demand
problems at all, and carry much higher margin.
Tesla sees the main profit in Robotaxis, and basically the profit in selling cars is minor.
But what about the fact that the compact Tesla would have likely used fewer batteries, maybe
40 to 50 kwh battery instead.
Well for all the other sacrifices you make just to save perhaps 20% of batteries consumed,
it may not be worth it.
Just think of the resources and effort to be poured into Tesla in making a car that
small carry all of Teslas features and still getting a decent range.
To save perhaps 20% fewer batteries per vehicle, and if half the cars sold are the compact,
then that's an overall 10% battery saving.
Well if Tesla put that much more effort into efficiency, as they would with a compact,
then they could possibly improve range 10% anyway.
The fact the compact is smaller means it will never be as safe as a 3 or a Y, thats a big
sacrifice.
It will be too small for car pooling.
Not good for delivery purposes, like a Model Y with all its storage.
Likely have a smaller screen for entertainment.
It will have less comfort as there is less space.
It is perhaps not the ideal form of taxi.
I mean when you get an Uber it's not usually a compact is it?
I am not talking about a Toyota Prius, but a small compact hatchback.
The more I think about it, then it probably isn't ideal.
And like we said, over the lifetime of the vehicle, as a Robotaxi, the cost difference
per mile is probably negligible, when you factor in all those sacrifices we already
mentioned, then it probably isn't worth it, and the passenger is likely willing to pay
this small fraction more for the added benefits of having a 3 and a Y, rather than a compact.
Tesla's demand is going is growing stronger with their existing vehicles, but Elon seems
exceedingly confident that there will be so much demand when FSD is complete.
Will this demand be from consumers wanting a Tesla because it drives itself, will it
be from business people purchasing Teslas to run in the Robotaxi fleet, or will this
be Tesla buying their own vehicles to add into the fleet for themselves.
That's the big question that many have asked for sometime.
Why focus so much on Robotaxis and not more models though?
Well remember a Robotaxi could potentially replace 5 ICE vehicles.
That's therefore a much faster way to transition off fossil fuels.
Also it would reduce road deaths the quickest too.
This may not be what the shareholders wanted to hear, nor the consumers.
But it sounds like Tesla has made jumps in progress with FSD, and clearly seem to be
pointing everything they can into selling AVs in the US, and Robotaxis shortly after
that.
This is the main objective for Tesla now.
Everything else is inconsequential nearly, when it comes to profits, which is why Tesla
are doing this.
I honestly wouldn't hold out for a compact Tesla until closer to the end of this decade,
if you wanted to be more realistic, and I am not sure it will be $25,000.
However, if you placed that $25,000 into Tesla stock, then there is the chance that it wouldn't
take too long, until that investment has matured to the valuation of a Model 3.