Get ready for Elon Musk’s next big bet: If you buy a Tesla, the car will pay itself off.
Yes, you read that right.
In what may be the ultimate side hustle, Tesla plans on joining the ride-hailing sector once its automobiles become self-driving. They’ll join what Musk calls a “shared autonomy fleet,” a program where Tesla automobiles will pick up and transport passengers while their owners sleep.
Still with us? Good.
Tesla—or rather, Musk—announced the news earlier this month in a response to Twitter follower @LivingTesla, who complained about the camera positioned just above the rearview mirror in Tesla models.
“It’s there for when we start competing with Uber/Lyft & people allow their car to earn money for them as part of the Tesla shared autonomy fleet,” Musk wrote. “In case someone messes up your car, you can check the video.”
Not to be outdone, @LivingTesla replied: “That's what I figured. Looking forward to the day I can turn this bad boy into a revenue stream. Thanks!”
Honestly, we can’t make this stuff up.
Of course, a couple of things must happen before Tesla gets on that third-shift, gig-economy life. First, Tesla’s fleet of cars has to become autonomous. (They aren’t, but Tesla’s really working on it.) Next, Tesla must convince customers that their cars won’t go full Skynet, which might be even harder.
A recent AAA survey found that 71 percent of Americans say they’re afraid to ride in a self-driving car, up from 63 percent of respondents in 2017. It doesn’t help that an Uber self-driving car struck and killed a homeless woman in Tempe, Arizona last year despite having a backup driver behind the wheel.
A judge ruled that Uber was not at fault for the death, and the company settled with the victim’s family. But a National Transportation Safety Board investigation did point some of the blame at Uber, which disabled the car’s emergency braking system for smoother rides.
In other words, Uber programmed the car to take chances.
Which leads us to problem #3: Ride-sharing is clogging up roadways, especially in big cities.
New research from the University of California-Davis exposes that uncomfortable truth. After examining the usage of 4,000 riders in seven major metro areas—including Boston, Chicago, Los Angeles, New York, Seattle, the San Francisco Bay Area and Washington, D.C.—the study concluded that ride-hailing is increasing vehicle miles traveled (VMT) in these cities. “In major metropolitan areas, we find that 21 percent of adults have used ride-hailing services… and an additional 9 percent of adults have used ride-hailing with friends,” wrote authors Regina Clewlow and Gouri Shankar Mishra.
The numbers jump to 36 percent among 18-to-29-year-olds, according to the report, which also showed a 6 and 3 percent net drop in bus services and light rail in these cities. Worst of all, the report warns that this trend of ride-hailing could lead to more traffic congestion and higher emissions of carbon dioxide. Indeed, new data from the U.S. Energy Information Administration shows that the country’s transportation sector (cars, trucks, planes, trains, and boats) releases more carbon dioxide emissions than power plants. At 1.9 billion tons annually, transportation now holds the top spot.
But that’s why, as crazy as Musk’s claim of an autonomous fleet is, people are clamoring for it. For starters, ride-hailing, for all its congestion and emissions—and, honestly, do the apps ever correctly pin where you are?!—is big, big business.
Despite annoyances like, for example, being sued by disability advocates who claim your company illegally excludes wheelchair-accessible vehicles from its Bay Area fleet, Lyft held its initial public offering earlier this month, opening at $72 a share with a valuation of $24 billion.
Uber is planning a similar IPO with an opening price of $44 to $50 a share, filling the company’s coffers with as much as $10 billion and setting a market valuation upwards of $90 billion.
Both companies see IPOs as magic bullets that can help triage the bleeding of recent quarterly losses. Despite generating $3 billion in revenue, Uber reported net losses of more than $860 million in the fourth quarter of 2018. Ditto for Lyft, which posted nearly $1 billion in losses against $2.2 billion in revenue last year.
All this makes Musk calling his ride-hailing shot more enticing. Tesla snapped its two-quarter profit streak after posting 2019 first quarter losses of $702 million. Some investors blamed the loss on Tesla’s focus on self-driving while others noted Musk’s long-standing game of “chicken” with the Securities and Exchange Commission after (jokingly) tweeting that he was considering taking the company private.
Here’s another reason: revenue was down 37 percent! The company reported that it delivered less than 61,000 vehicles last quarter, a 31 percent drop from Q4 2018. But, again, if anyone knows what clean energy can and cannot do, it’s Musk. Last year he claimed that he could not only build the world’s largest lithium-ion battery, but he could build it in under 100 days, use it to power half of Australia and have it pay for itself within a few years.
And you know what? He did it.
There are already plans for Tesla to build an even bigger battery in Australia. Recently, Tesla installed another giant battery, this time on an electrified 311-mile railway in Japan designed to provide emergency backup power if the trains shut down.
In non-emergency situations, the powerpack would reduce energy costs by storing power for use during peak hours, a practice gaining ground with large-scale battery plants as well as individual homes.
It’s a market that Tesla can capitalize on, thanks to its partnership with battery supplier Panasonic in building the Gigafactory, the company’s massive lithium-ion factory based just outside of Reno, Nevada.
“There are other companies who make space and storage batteries, who are getting contracts to build smaller versions of what Tesla did in Australia, including some pretty large projects,” says Jake Raden with Swell’s impact team. “Tesla’s just moving faster and harder than everyone on this. They're taking advantage of a wide-open market.”
Autonomous cars making you money while you sleep and reducing greenhouse gases? Sounds like just another day for the modern-day version of Howard Hughes.