Extra Flaws within the Robotaxi Revolution Dream

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Final Up to date on: twenty seventh April 2025, 07:35 pm

I printed an article the opposite day on flaws within the robotaxi revolution dream. It was based mostly on a reader remark that I needed to focus on. Nonetheless, there was one other reader remark I had noticed to focus on as nicely, and it will get even a bit extra granular. Right here’s that remark, from Matthew2312:

Your entire 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 anyplace robotaxis are going to realistically function that already do all the pieces a robotaxi can do after which some. Consequently, we already know how large that market is (not less than on the present pricing).

• The whole 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 folks journeys is lower than a million.
• Practically all the human rideshares are half time deployed property not like robotaxis.
• When you translated that to automated taxis at present pricing it’s perhaps 800,000 autos.

Okay, so the market already exists, it’s totally 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 automobile prices. So the internet will run $15–$20 an hour.
• Whenever you full all the maths, the motive force will get 35%–45% of the fare. So if that dropped to zero, you could possibly scale back the price 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 automobile (routine cleanout between rides and shifts, and so forth.), monitoring the automobile’s situation, refueling, and so forth. So let’s be beneficiant and say 35% financial savings.

Now, if the price was 35% much less per journey than it’s at this time, how a lot larger would the market be? 1.5×? It’s definitely not way more. So that’s 1.2 million autos? And the way worthwhile is that enterprise? The Uber a part of the enterprise remains to be barely worthwhile (and helped considerably by the bundle/meals supply service). If we dropped costs by 35%, the profitability could be close to zero. So to maintain an affordable gross margin, you can’t 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 is just not that nice.

You may construct a mannequin round this, however in a nutshell, there’s a million-vehicle enterprise right here that has the potential to generate a fairly good $20 billion a yr in earnings within the US. Cut up throughout just a few operators, you’ll in all probability haircut that for competitors, however there are just a few $5 billion a yr Web Revenue companies available. Definitely not rooster feed, however not sport 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 — may justify perhaps 10% of the present valuation on an optimistic view. So there’s little shock that Musk shut down the evaluation.

Nice factors.