More Flaws in the Robotaxi Revolution Dream

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I printed an article the opposite day on flaws in the robotaxi revolution dream. It was primarily based on a reader remark that I wished to spotlight. Nevertheless, there was another reader comment I had noticed to spotlight as effectively, and it will get even a bit extra granular. Right here’s that remark, from Matthew2312:

Your complete robotaxi dialogue has by no means made any sense to me. Let’s have a look at the US market the place we have already got human drivers on demand wherever robotaxis are going to realistically function that already do the whole lot a robotaxi can do after which some. Consequently, we already know how huge that market is (at the very least on the present pricing).

• The overall variety of taxis and rideshare autos within the US is round 2 million.
• Greater than 50% of all Uber journeys are bundle or meals supply. A robotaxi can’t do most of that. So the whole variety of autos concerned in individuals journeys is lower than a million.
• Almost all the human rideshares are half time deployed property not like robotaxis.
• When you translated that to automated taxis at present pricing it’s possibly 800,000 autos.

Okay, so the market already exists, it’s absolutely served by human drivers, and it requires 800,000 autos. However what if the market grew? Might you massively reduce costs (say, by 50%) so that you’d get an enormous surge in ridership? No. Right here’s why:

• Rideshare drivers earn $25–$31 gross per hour. That’s earlier than deducting car prices. So the web will run $15–$20 an hour.
  • Whenever you full all the mathematics, the motive force will get 35%–45% of the fare. So if that dropped to zero, you might cut back the fee by 40%. But it surely received’t drop to zero as a result of the motive force additionally does a bunch of stuff somebody nonetheless must do, like sustaining the car (routine cleanout between rides and shifts, and many others.), monitoring the car’s situation, refueling, and many others. So let’s be beneficiant and say 35% financial savings.

Now, if the fee was 35% much less per trip than it’s at present, how a lot greater would the market be? 1.5×? It’s actually not way more. So that’s 1.2 million autos? And the way worthwhile is that enterprise? The Uber a part of the enterprise continues to be barely worthwhile (and helped considerably by the bundle/meals supply service). If we dropped costs by 35%, the profitability can be close to zero. So to maintain an affordable gross margin, you can not drop costs by greater than 20% which suggests the market grows by what 25%? There may be simply not that a lot cash to be saved by eliminating the motive force and the elasticity of demand will not be that nice.

You’ll be able to construct a mannequin round this, however in a nutshell, there’s a million-vehicle enterprise right here that has the potential to generate a reasonably good $20 billion a yr in revenue within the US. Cut up throughout just a few operators, you’ll most likely haircut that for competitors, however there are just a few $5 billion a yr Web Earnings companies available. Actually not hen feed, however not recreation altering both. Waymo will get its $5B. Who else?

Oh, and for Tesla, the robotaxi enterprise — if it reaches its full potential and Tesla is one of some leaders — might justify possibly 10% of the present valuation on an optimistic view. So there’s little shock that Musk shut down the evaluation.

Nice factors.