- Tesla has a giant opportunity to make a ton of money
by being the first ones to have fully self-driving cars.
However, they're making a mistake right now by asking people
to pay for autopilot, because I believe the data
that they collect from autopilot is worth more money
than the actual cash they get from the owners.
Let's look into the details of this
and try to understand why that might be the case.
But first, let's understand what autopilot is,
and where it came from, so we know
about where it might be headed.
Released back in October of 2014, originally for the Model S
and then the Model X, autopilot was a new
driver-assist feature with the idea
that one day it would help them
become fully autonomous, fully self-driving.
This actually created the pre-owned market
for Tesla vehicles because all the vehicles
that were made prior to this were unable to be upgraded
to the new hardware necessary to make autopilot possible.
Now they didn't come up with this themselves.
They worked with a company called Mobileye
until about July of 2016, when they ended
their relationship, and they started working
on the second version, or AP2 as it's known,
based on their own technology
and with a few different providers.
So since then, there hasn't really been much.
So this is October of 2016 when they first announced
autopilot 2, or Hardware 2,
and we really haven't seen many advancements since then.
That said, Elon did make some statements
in a recent Q and A that are interesting,
because he basically is promising
that their system will be a hundred to 200% safer
than a person, a human driver,
by the end of next year, of 2019.
And he said, we're talking maybe 18 months from now.
So, it's been a while, we started out in 2014,
and now it's 2018, and he thinks we're gonna get there.
However, I'm not quite sure.
I'm a little bit less convinced.
I'll tell you why in a second,
but first just let me break down what autopilot even is.
Now, autopilot does a couple things.
It does autosteer, so it keeps you
in your lane while while you're driving,
and this is really just meant for highways,
where there aren't stop lights.
It also has a feature called traffic aware cruise control.
Other people call it adaptive cruise control.
Basically, this is just monitoring the cars
in front of you and speeding up and slowing down
based on what's happening in front of you.
It also has a couple other things,
a new beta feature called the auto lane change,
and what this does is you can click on
the actual turn signal,
and it will shift lanes left or right
on the freeway for you.
It also has, related to this,
the ability to do parallel parking
and perpendicular parking,
where it will actually use its ultrasonic sensors
and actually park for you.
But that's not necessarily directly related.
It's a feature included in autopilot,
but most people, when you think of autopilot,
you think of the act of driving itself.
Some things that it doesn't do is work on surface street.
Now, technically you can enable it,
however, it doesn't stop at a red light,
because it can't discern that.
And in fact, if you think about it,
if there's nothing else behind it,
finding a red light in the sky might be easy,
but if you're in a big city, or somewhere like Las Vegas,
it could be nearly impossible for the computer
to do that as far as the technology is today.
Another thing it doesn't really do is stop
if there is something in front of you
that is already stopped, like maybe a fire truck.
And this is kind of a sad story where a person
was on autopilot actually rear-ended
the back of a fire truck that was sticking into a lane.
And the reason it doesn't do this,
from all the reading and research I've done,
is that if it stopped every time it saw something
that appeared to be stationary in the road,
it would pick up all kinds of things and stop all the time.
So, it is kind of a give and take.
You can't have it stop at everything
that it thinks might be in front of you
and also be able to drive smoothly as well,
at least not yet.
And so it makes a little bit of sense,
because when you're driving,
the sensors seem to go off at random times.
If you see a little tiny dip in the road,
sometimes it'll give you the emergency signal
like there's something, you're gonna hit something.
So, that is something that is very concerning,
and why you still need to pay full attention
when you're using autopilot.
Now, originally autopilot was included
in the Tech Package, and then there was a separate cost
of $2,500 when it was still AP version one,
autopilot version one.
As of now, for autopilot version two,
it's $5,000, and then if you pay for it after the fact,
meaning you bought the car and didn't opt for it then,
but you want it later,
it's an additional thousand dollars, so $6,000.
So being as we're only at level two,
we have a long way to go
and it's good to remember Pareto's law.
And Pareto's law states that
20% of the work will get you 80% of the result.
In this case, towards full self driving.
Then the battle begins and this is where that last 20%
takes a whole lot longer and a whole lot more work
then the initial 80%.
So where we're at right now is up to debate
but if you just look at the basic levels that we're at,
we're really at level two,
approaching level three.
Level four and level five are gonna be a long ways out
just based on these simple principles
that have kind of held true
throughout technology's evolution
for the past several decades.
So the path that Tesla is taking
is an interesting one because a lot of other companies
are using pretty expensive LIDAR and other types of sensors
to solve this problem of teaching the car awareness
and how to navigate those things,
where Tesla is trying to rely solely
or mostly on cameras.
Now Elon has stated that this is kind of the Holy Grail
and I agree that if you can teach a computer to see
and this is actually what the field of computer vision does
then you can really solve a lot of these problems
very cheaply because all you need to do
are set up some cameras and feed it into the neural network.
The kind of brain of the self-driving car.
And as my friend and doctor of computer vision,
Satya Mallick says.
- The person who has the biggest data set
is ultimately going to win.
- And that is why I think Tesla has a unique advantage here.
The question is how do they get more data?
Tesla currently has over 300,000 cars on the road
and they're gonna start to deliver more and more
as the model three comes out.
And a lot of these are equipped
with all the sensors and everything they need
to one day become self driving.
The problem is is that they can only collect
some data from these because not everyone has autopilot.
You see, they can already detect the changes in speed
and things like acceleration
or if they swerve out of the way,
those kind of things are very obvious.
But what they really, really need
is people using autopilot and how people react.
So if a person, let's say is in autopilot
and somebody cuts in front of them
and the person does something with the wheel
that is teaching the AI, the computer itself
what it should do in that scenario.
And so the more people using autopilot,
the better the data that Tesla gets
and the faster they'll be able to achieve
these new levels of autonomy.
So, if they want to do that,
if they want to achieve these new high levels of autonomy
they should make it free.
- Say what?
- But of course, they're a business that's publicly traded
so they need to worry about shareholders
and financial stability and solvency
and those kind of things.
So let's take a look and see what the actual cost would be
of just making it free for everybody.
If we look ahead to 2022 Tesla could have
about two million cars on the road by then
depending on how things go.
To be conservative
let's call it 1.5 million cars on the road.
That's an additional 1.2 million cars versus
what they have on the road today.
All with the autopilot ability.
At five thousand dollars each
for these 1.2 million new cars,
that's 6 billion dollars
that they would be missing in revenue.
And that's a big chunk of money.
Definitely one that I think no company can ignore.
Maybe Apple but.
(cash register sound)
Most other companies can't really ignore
that amount of money.
But let's take a look on the other side
and see what they have to gain
if they were truly able
to achieve level four or five autonomy by 2022
and I'm just gonna give one example.
What they call the Tesla network.
The Tesla network is this new ridesharing service
basically the same idea as a Uber or Lyft
ridesharing service but without the person.
So you as an owner would buy your car
and then when you're not using it,
you can send it off to make you money.
Simple, beautiful.
If Tesla did this, by 2022 the ridesharing industry
will likely be worth over 28 billion dollars.
If they can achieve this level of autonomy by then
and deploy their new network they could, in my estimate,
capture about 20% of that market.
Now that's my speculation, of course they could
not capture any of it, they could not have it ready by then
but let's put that on paper as a 20% market share in 2022,
if they're able to
achieve level four or five autonomy by then.
That would bring them 5.6 billion dollars in revenue
just for that one year.
Now, obviously not all that money goes to them,
some of it goes the owner itself
but for a topline revenue number,
it's a pretty good start.
Now assuming the industry continues to grow
by 2025, three years later
they should have recouped all of the money
that they essentially missed out on
in those earlier years by giving autopilot away for free.
If you compound that with the reduced cost
of not having a driver,
something that everyone is working on
but would dramatically change the profitability
of this service and would also allow you
to charge less for it, capture more market share,
et cetera, et cetera they could see this become
a big percentage of their annual revenue
and it would just keep compounding
because the more cars they had on the road
the better the AI got, the money they make,
the more market share,
it's kind of like a snowball effect for them.
So what's stopping 'em.
Well there's a couple things.
First, they're cash poor
and building factories and new robots
and things like that
require a huge investment up front
that doesn't get recouped until much longer into the future.
And so they need the cash on hand right now
in order to pay for these things
otherwise they won't be able to achieve the kind of
full strategy that they have laid out.
They could try to raise money with more investment
but they've kind of exhausted those resources for now.
They also could just wait for model three to ramp up
and once they're producing those at scale
maybe five, six thousand a week,
the cash will be coming in pretty quickly
and they'll be able to then invest in other areas.
And they could also just offer autopilot free to owners now,
with an agreement that when the Tesla network comes online
that they will essentially repay them
by letting them use their car as a part of the fleet
without getting paid until they get that money back.
So I'm curious what you guys think.
Should Tesla give autopilot away for free?
Let me know why or why not down in the comments below.
And don't forget, when you free the data
your mind will follow.
Thanks for watching it,
I'll see you guys back here next time.