Elon Musk sent a two-line email telling employees how great Tesla's autonomy day was, but the plan has lots of holes
- At Tesla's "Autonomy Day," CEO Elon Musk said the company will have a million robotaxis on the road in 2020.
- Autonomy Day served to distract from Tesla's recent operational challenges ahead of the company's first-quarter earnings report on Wednesday.
- Tesla has been promising self-driving cars since 2016. It still hasn't demonstrated the cross-country, hands-free drive Musk said would be possible by the end of 2017.
Tesla CEO Elon Musk did what he does best on Monday when he presented bold, visionary promises that only his most loyal followers would take at face value.
Specifically, Musk gave guidance that Tesla will have a million "robotaxis" on the road next year, meaning a million truly driverless cars that can operate commercially in a ride-hailing network, generating passive income for their owners.
Musk celebrated the day in an email to all employees on Monday afternoon.
Subj. Great day for Tesla!
The Autonomy Day was extremely well-received. Feedback has been incredible. [Smiling emoji here.]
Awesome result of extremely intense effort by the Autopilot Team!
[two clapping emoji]
Promising safe, driverless cars within a year is already exceedingly optimistic. But Musk went further to say that each Tesla -- equipped with some future version of its Autopilot and Full Self-Driving software -- could generate $30,000 in gross income for owners each year if operated as a robotaxi.
That's not realistic, considering Tesla's production numbers to date and the average salary of a ride-hailing driver in the US today.
The event served as a distraction from Tesla's recent operational, regulatory and financial troubles, which will be in full focus during the company's first-quarter earnings report on Wednesday.
Among some of its recent challenges, Tesla slowed production of its Model S and X vehicles in recent quarters and recently closed stores and laid off thousands of employees. Plus, Musk remains locked in a battle with the SEC over his use of social media to disseminate material business information. Tesla had around $180 million in debt coming due this month. And sales of its Model 3 slowed down in the first quarter.
A history of self-driving promises
In 2018, ride-hailing trade publication Ridester found that human drivers working 40 hours a week for the likes of Uber or Lyft make annual salaries of about $31,000 before vehicle expenses, and about $20,000 after expenses but before taxes in the US.
Those people are driving cars already deemed street legal, and picking up fares in major cities and at airports where local laws have been, for the most part, hashed out authorizing them to drive there.
Meanwhile, the company has produced only about 600,000 cars to date. Not all of them are still on the road.
Tesla said in its fourth-quarter earnings release that it was aiming to deliver 360,000 to 400,000 vehicles in 2019, about 45 percent to 65 percent more than its deliveries last year.
To reach a million robotaxis in 2020, Tesla would have to continue producing cars near the high-end of its previous guidance. Then, the majority of those cars would have to get the necessary software updates to reach Full Self-Driving status, which currently costs $5,000 when customers order the car or $7,000 as an upgrade if added after delivery, although these prices could change over time. Finally, owners would have to agree to let their cars participate in a Tesla robotaxi network.
Meanwhile, truly driverless vehicles do not yet exist. Tesla doesn't sell one. Neither does any other company.
Deutsche Bank analyst Emmanual Rosner, who took a test drive of the vehicles Tesla showed on Tuesday, was skeptical, writing, "Throughout the ride, the car performed relatively well but experienced a few rough maneuvers and had one disengagement where it failed to recognize cones blocking off some parked vehicles on the side of the road."
He continued, "Given our own test ride still faced issues despite being on a pre-planned course and under relatively simple road conditions, we believe the company's targeted timeline for both full self-driving and its robotaxi service is at the very least aggressive. Ultimately, we still wonder whether Tesla can even solve the large challenges of fully autonomous driving with its vision-based approach alone."
Musk has made grandiose promises about self-driving before.
In October 2016, Musk touted Tesla's second-generation autonomous driving hardware, saying that system could power full level 5 autonomy in his company's cars — that means the car could drive in all conditions with zero human attention. Musk said the company expected that a Tesla would be able to complete a hands-free trip across the US by late 2017. As of April 2019, Tesla has not demonstrated any of its vehicles completing such a trip, although self-driving pioneer Anthony Levandowski says a car from his new start-up accomplished the task last December.
Analysts were generally skeptical. Cowen analysts wrote, "The Tesla Network robotaxi plans seemed half baked, with the company appearing toeither not have answers to or not even considered pretty basic question on the pricing,insurance liability, or regulatory and legal requirements."
Even some historical Tesla bulls were not swayed by the presentation.
Dan Ives, Managing Director of Wedbush Securities said, "The presentation was more visionary and lacked the details the Street wants to know which is key to credibility. It was more geared to the autonomy world as Musk is telling technologists 'don't forget about Tesla,' with Waymo and Uber getting a ton of credit."
Tesla stock traded down about 4% on Monday, and ticked up by less than a point in mid-day trading on Tuesday. The stock is down about 30% from its most recent peak in December, and down about 9% from a year ago.