Elon Musk's decision to greenlight a robotaxi instead of an affordable electric vehicle could cost the company its leadership.
Musk reportedly scrapped that effort in favor of a robotaxi, the kind of fantasy project that defined his first decade at the helm. It can be argued that the company is where it is today by thinking big and then delivering on enough promises to impress shareholders and generate significant positive cash flow. The problem is that, in the beginning, there was everything and nothing to lose. The entire company might have gone under, but the stakes were also lower.
Today, Tesla is no longer the plucky upstart. Last year it generated nearly $100 billion in revenue and posted net profits of $15 billion, the kind that would cause other automakers to reward their shareholders with richer dividends. It's a global manufacturer that produces hundreds of thousands of cars every quarter, the kind of operation where success is measured by continuous improvement in productivity and process metrics.
Tesla was reportedly about to build a $25.000 electric vehicle. In January, Musk confirmed that the company would begin construction of a next-generation vehicle at its Texas plant in the second half of 2025. Suppliers had been asked to submit bids for parts contracts, reported Reuters, with a weekly production volume starting at 10.000 vehicles per week. Given declining sales of the company's existing product line, it would have been a welcome boost.
An affordable electric vehicle would have significantly increased Tesla's total addressable market by dramatically undercutting the average selling price in the US, which is currently around $47.000. It would also have given the company a product to hold its own in the face of an expected onslaught of affordable Chinese electric vehicles.
But it would also have meant creating a production line from scratch, something the company last did at scale with the Model 3. By all indications, it wasn't a comforting experience.
But build a robotaxi. That sure sounds fun.
Musk has long been in love with the concept. Four years ago, he said such a car could earn its owner up to $30.000 a year while ferrying paying passengers back and forth. It would be very popular, Musk, According to the news He told biographer Walter Isaacson that “there is no amount we can build that will be enough.”
The problem is that Tesla has been trying to master autonomous hardware and software for a while now, and doesn't appear to be close to delivering a vehicle capable of driving at Level 5, which would require no human intervention. Despite years of work, Autopilot is still a Level 2 system, meaning it requires human attention at all times. The same goes for fully autonomous driving. (In fact, the company recently began using the term “supervised” to refer to the software package.) And while artificial intelligence has advanced rapidly lately, is it moving fast enough to provide Tesla with a blockbuster product in the coming years?
Given Musk's desire to pursue exploratory projects, the logical path would be to create a factory within Tesla or create a division that focuses exclusively on bringing a robotaxi to market. The latter is unlikely to happen because much of Musk's wealth is tied up in Tesla stock, and he probably doesn't trust anyone else to run the company when so much money is at stake. Whoever does it first has a better chance of success, but Musk also likes to seem very involved in, well, everything Tesla. He would oppose the idea of “only” running a factory of experimental projects.
It's something Tesla's board should probably weigh in on. And maybe it will. But numerous Reports They have also illustrated how closely linked that board is to Musk. They don't seem to disagree on much, and that could cost Tesla his leadership.
