Another new model just announced by Elon.
Or is it?
In the Q4 earnings call Elon was asked: "How is the progress of the $25,000 compact car?
Can you give an update?"
In which he replied: "Well, we're not currently working on the
-- on a $25,000 car.
We -- you know, at some point, we will, but we have enough on our plate right now, too
much on our plate, frankly.
So, you know, at some point, there will be.
I think that's sort of a question that -- it's sort of the wrong question, really.
It's -- really the thing that overwhelmingly matters is when is the car autonomous?
I think, at the point in which it is autonomous, the cost of transport drops by, I don't know,
a factor of four or five."
Elon said that Tesla are not working on a
$25,000 car.
Now the $25,000 car was somewhat synonymous with the compact car, aka the Model 2.
We expected a $25,000 compact vehicle.
Now what if we just remove this $25,000 price tag, and then revert back to what we were
told and believed before?
i.e.
Tesla are working on a compact vehicle that is potentially designed around being in the
Robotaxi network.
And he goes on to say it's the cost of transport that matters, not the cost of a vehicle, implying
that is what they are really working on.
Then the main mission we previously have thought, pretty much since Battery Day, is still in
alignment, and Tesla are not pivoting as much as we thought.
Design a vehicle specifically for Robotaxis, that is smaller, lower cost and more efficient.
We were even later told that this compact vehicle might not even have pedals or a steering
wheel.
Right, further confirmation that the compact vehicle is designed for Robotaxis first, or
FSD.
So what if Elon saying they are not making a $25,000 car just meant literally that.
In that this compact we are making, that is designed around FSD, will simply not be the
$25,000 car.
In other words, the compact Robotaxi is still on the plans, and still potentially this half
of the decade.
So what will this car look like?
According to Elon, quite futuristic.
Now we were only ever shown one official rendering of the compact, and exterior only, no hints
on the interior.
But for starters electric cars are a lot more spacious on the inside, relative to the exterior
size of an ICE vehicle, partly due to not having an engine which saves a lot of space.
I think my Model 3 in the rear has more leg room than my E Class Mercedes did, which is
a big executive vehicle.
So despite this vehicle being a compact, it probably isn't going to be quite the squeeze
we think of most compacts.
Except it doesn't stop there.
This interior can be a revolutionary new design.
There no longer needs to be a dedicated drivers seat, obviously along with all other driving
aids, steering wheel and pedals, but also no rear view mirror, or even side mirrors.
No stalks, no where for gear changing.
Just a screen, or several.
The passengers do not even necessarily need to be facing any particular direction.
But still even if electric vehicles are more
spacious than ICE, it is still going to be a compact, and less room than a Model 3 or
Model Y.
But what if the interior was configurable somehow?
What if when you order your taxi you also order a seating configuration, most likely
dependent on the number of passengers you have.
Given the likelihood the majority of taxi orders are going to be single passenger, then
its a waste of space, or volume, for one passenger to sit squashed in one seat, when there are
perhaps 4 other vacant seats.
Perhaps the seats could move electrically to be reconfigured around a single passenger,
offering ample leg room.
Possibly even a set up, with accessories even available.
Perhaps a table that comes out of the seat, similar to an airline, that you can use for
your laptop.
Or maybe a seat that reclines all the way to a bed.
We are totally able to rethink car travel here.
It sounds like about 90% or so of Uber fares are just a single passenger, therefore I would
expect a similar ratio for a Robotaxi.
So why not have the ability to cater more to the convenience of a single passenger.
Or would it make sense for this vehicle to
be designed more around pooling.
Perhaps a mini-bus style vehicle, that can take up to 8 passengers at a time?
Well maybe, but I don't think so.
Although that might be close to a replacement of a bus, and may not be for a while, perhaps
not until, or if, Boring tunnels become a thing.
Personally I don't think this is what we should expect.
This would sound more like a robobus, and we are clearly being told robotaxi.
But with this dedicated Robotaxi vehicle,
then Tesla don't need to worry about cost so much here either, as the return is absolutely
insane anyway you look at it.
They can easily justify a lot of extra expense in getting these Robotaxis out.
Especially if they aren't trying to hit a $25,000 price point.
I mean just saying it now makes so much sense.
Especially if these are going to pick up perhaps $1/2m in fares over their lifetimes.
Having a sufficient budget in developing them changes the game.
With an increased budget Tesla could do things like upgrade the cameras to higher quality
to improve vision.
They could place the cameras towards the top of the vehicle too, so they can see over things
better, and have a clearer view.
Tesla have learned so much about AI FSD neuralnets now, than compared to when they first designed
the 3, and they probably have a better idea of what is required now for a Robotaxi or
FSD, and that the car can be more designed around that first.
I mean we think that LFP batteries will obviously
be used in these taxis, but if there is a high enough budget then perhaps they could
use nickel, or perhaps manganese batteries.
In fact manganese might be perfect for them, the energy density is close to nickel, except
it's about 10 times more abundant.
And like we are saying, these cars don't need to be designed around pinching every penny,
they can have a decent budget for production.
Not using LFP will mean they get a longer range.
Which might very well be necessary, who knows how far some people might want to travel on
a Robotaxi.
Of course more range each day, means more fares before having to go and recharge again.
We all know how impressive the drag coefficient
of the Model Y is for a cross-over.
But it's a reasonably heavy car, and aerodynamics were paramount in getting more range.
Thus it was necessary that a lot of the vehicle was designed around improving efficiencies.
But that was with old technology.
When batteries were less efficient, there was no structural battery pack, etc.
Well this compact is already going to be a significantly lighter car.
I mean the Model 3 is almost 1000 lbs lighter than the Model Y, without even using rear
castings.
The compact is possibly at least 500 lbs lighter than the Model 3.
But then if you include structural battery packs, and whatever revolutionary new cell
design Tesla might have achieved for the Robotaxi.
Then what, could we guess that this compact robotaxi could be only around 2000, perhaps
2500 lbs?
We are also removing other various items like steering wheels.
It will very likely just be rear wheel drive to save in weight and cost too, and increase
range.
The battery pack is probably only going to be 40 kWh, perhaps at most.
Not to mention all the other advancements we might have seen by this stage, more ubiquitous
charging points, and faster charging, implying less range is necessary anyway.
My point being that this vehicle can be designed more so around utility than drag co-efficient.
It will probably still look cool, but it doesn't need to, as it's likely not going to be something
people are owning and driving privately.
So it doesn't need to be designed around looks or efficiency quite as much, and utility might
take more precedence.
And possibly safety too.
What with it being a smaller car, and Tesla caring so much about safety, there may be
added safety features around the design.
Of course if there is a way for one person to just sit in the center of the car, then
that is also likely safer too, as less chance of impact to said person by another vehicle
in an collision, as the person isn't sitting at the edge of the car.
Right, ownership, who will own these vehicles?
What if they cost Tesla about $35,000 each to produce, just for cost of goods sold.
I mean we want millions of these taxis around the world, or even that many just around the
US.
Possibly a number of around 10 million just in the US.
Obviously Tesla can only make them as fast as they can make them.
But presumably they could reach millions a year.
It will highly possibly be the most produced vehicle in history.
If Tesla are producing just 3 million a year, then that's $100 billion a year required to
cover the costs of these cars, and it may take a couple of years or more until they
have paid for themselves.
Well that's a lot of money, even for Tesla.
I don't think they could borrow that much, although the cash flow of the company would
likely be significantly higher by that stage, it may be a possibility.
On the other hand, there are plenty of people who would likely be willing to buy one.
And perhaps they might even cost something like $100,000 to buy, and they still had to
share the proceeds from the taxi with Tesla.
Tesla wouldn't be selling a vehicle, they would be selling a business.
Tesla becomes the business that makes the business, from the machine that makes the
machine.
I mean we were kind of promised on autonomy day, we buy a Tesla now, and one day it will
be added to the fleet.
And perhaps that still is a possibility, perhaps if you do order a Robotaxi you get to choose
a compact, Y, 3 or even an S or X.
And as the compact is likely the cheapest option, and the most suited to single passengers,
and the majority being single passengers, then perhaps that will simply be ordered the
vast majority of the time.
But if we are able to buy the dedicated Robotaxi,
and use it as a business, then I think that is best for Tesla's mission.
Someone has to manage and maintain each taxi, they need cleaning, charging and storing.
What about at night time when no one wants a taxi, where does Tesla store them all?
They would need massive car parks in each city.
We want to reduce car parks, not add to them further.
There are plenty of people's driveways or garages where these taxis could be stored
and willingly too if they are being paid.
Otherwise Tesla need to get into the car cleaning business too.
It feels a bit basic for Tesla, and surely they have more important items to attend to.
Ok sure I bet I get a lot of comments about humanoid robots cleaning cars, but personally
I can't see that for quite sometime, and doubtful by the time this robotaxi is launched.
Therefore I think it would be good for Tesla to share with the community, as they have
somewhat promised already.
Remember Uber offers the most taxis without owning any.
Tesla could be the same.
I very much hope this is the path they decide.
And/or, perhaps Tesla have more of Lime Scooter business model.
Tesla own the taxis, and anyone who wants can send one back to their house, and charge
it, clean it and store it, and get paid for that service.
Or possibly a combination of both business models.
Perhaps Tesla will need some of their own inventory to supplement any towns or cities
that don't quite have enough taxis to meet demand.
If these vehicles are solely for Robotaxis,
then they wont cannibalize any of the existing products.
Especially if Tesla sell these taxis for $100,000 or something.
If they even sell them.
Obviously if they don't even sell them to the public then they can't cannibalize the
other products.
But if they did sell them, they are not selling private passenger vehicles, they are selling
small businesses.
When compared to the potential for a $25,000 compact, which could very likely cannibalize
a Model 3.
The $25,000 vehicle would have had a lower profit margin accompanied with this much lower
average selling price.
Perhaps a profit of $5,000 per compact, compared to $15,000 for a Model 3.
You don't want to cannibalize your profitable products with significantly less profitable
ones.
But who is crazy enough to insure robot driven
vehicles, that do perhaps 10 times more driving than a traditional vehicle, which you might
therefore assume has 10 times more likelihood of being in an incident.
Well Tesla will obviously, and this was, in my opinion, the main purpose of Tesla starting
their insurance business.
The other reason for insurance being one more way of getting the overall cost of ownership
down.
When costs or prices decrease, demand increases.
And of course a little more profit for Tesla too.
One of the most popular issues I hear about
Robotaxis is that people simply won't look after them.
They will wreck them, damage them, throw up in them, or whatever.
Passengers will have no respect for them and treat them badly.
Leave rubbish in them, eat in them, or whatever.
And ok, this is a fair point to address.
But what if these taxis are designed around that more so.
Perhaps the seating is far more rugged and durable, especially if they might do one or
two million miles in their lifetime.
Totally waterproof, and very difficult damage, stain, rip or whatever.
Although I feel like the current seats aren't far off that already.
But also perhaps a better visualization of the actual passengers.
Maybe even multiple high quality cameras in the interior so Tesla can see what their passengers
are doing.
Of course at any one time in the robotaxi you know the exact passenger who is in the
taxi, or at least who requested the fare.
Tesla also have this person's credit card on file too.
Thus Tesla can make this person responsible for anything that happens to that taxi whilst
said passengers are in the taxi.
For example there will likely be rules in the taxi, probably like no eating or drinking,
or possibly only water.
Of course you can use waypoints and set destinations for a break if so need one.
And if anyone breaks any of these rules, then there are fines and penalties.
Perhaps $100 if you eat in a Robotaxi, and banned for 3 months.
Now that alone would scare a lot of passengers into not eating.
Tesla blows our minds so much, we don't know what to expect they are capable of, imagine
a typical passenger who doesn't have a similar penchant for Tesla as we do either.
They might instantly think that Tesla's technology will immediately know, and they instantly
get an $100 fine.
Even if Tesla didn't know, it would be enough to stop a large proportion of people eating,
and if not then raise it to a $250 fine.
And then what about actually damaging or vandalizing the vehicle at all.
Well Tesla might say something like we will prosecute to the full extent of the law, and
you could even be arrested.
The passengers realize Tesla know who they are, their name, address, credit card, maybe
even Twitter account.
Most passengers wouldn't think they could get away with it anyway, so not worth risk
trying.
There are better ways to break the law with a more positive outcome.
The risk to reward ratio has increased.
How would such an incident even get reported to Tesla though?
Well what if the robotaxi manager gets their robotaxi back at the end of the day and discovers
all this mess in the car.
They can then review the video for the day, and pin point the exact time the incident
occurred.
They would then press a button on the screen that says report to Tesla, and then perhaps
a few options as to what they are reporting, like damage, eating, or whatever.
The reports are then sent to Tesla, they process them, and alert the passenger via their app.
The passenger receives the notification, and can either accept the fine, or penalty, or
dispute the claim.
I don't think this will need to be the case much.
I think there may just be a bit of debris each day by the footwells of the vehicles,
from what people have had on their shoes when they entered the car.
They will likely just need a quick vacuum on the inside.
I think the occasions will be rare when there actually is something to report.
And if they have to report some rubbish, perhaps the taxi manager also receive half of the
fine too, for the extra effort of cleaning food off the seat or something.
I have got to say, if Tesla are able to move
into a dedicated Robotaxi, and it's not going to be built on a shoestring budget, then I
actually have a lot more confidence in the future potential of Robotaxis, if they are
able to design it as a Robotaxi from the ground up with utility kept in mind.
This is actually incredibly exciting, and has increased my conviction in Tesla's ability
to reach Robotaxis.
And remember with Robotaxis, the numbers get nutty.
Think 5 figure stock price.