Elon Musk is about to reveal Tesla's robotaxi. Uber and Lyft should be nervous.
Tesla is expected to unveil a new robotaxi service that could compete with Uber and Lyft.
Tesla could offer incentives to drivers and lower their costs, challenging Uber's market share.
Analysts see Tesla as a possible threat to ride-hailing giants but it may also be a chance to partner.
Elon Musk's highly anticipated Robotaxi Day is finally happening Thursday evening in Hollywood — and it has the potential to shake up the ride-hailing industry.
Musk has been touting Tesla's Full Self-Driving software and its potential to create a robotaxi network for years. Analysts have told Business Insider that Tesla's emergence in the ride-hailing industry could pose a long-term threat to Uber and Lyft. It may also force them to develop and expand their own autonomous-vehicle offerings or seek out a partnership with Musk's company, similar to Uber's partnership with Alphabet-owned Waymo.
Tesla's event is expected to feature a look at a new autonomous vehicle, the rumored robotaxi, and an accompanying ride-hailing network.
In June, Tesla released a teaser of what the app for the ride-hailing platform would look like. The concept involves Tesla using its network of owners to create a fleet of autonomous robotaxis that could be summoned through an app. Musk has suggested that Tesla owners who participate could earn up to $30,000 a year.
A competitive threat to Uber, Waymo, and Lyft
Tesla's entrance into the ride-hailing market poses a significant development for both Elon Musk's electric-car company and the players that now dominate the market.
There's been "considerable angst" from Lyft and Uber investors heading into the event, said the Wells Fargo analyst Ken Gawrelski, who has an "underweight" rating on Tesla, an "overweight" rating on Uber, and an "equal weight" rating on Lyft.
Gawrelski said that Tesla could offer a lower-cost service than Waymo, and there would likely be "a cost advantage to Tesla on a per-ride basis and per-mile basis." Gawrelski has an "equal weight" rating for Waymo's parent company, Alphabet.
Morgan Stanley analysts predicted earlier this month that Tesla would likely offer a discounted or free FSD software update to drivers who use the ride-hailing service, along with a lower-take rate to drivers to encourage faster adoption.
The ride-hailing industry has been dominated by two major players — Uber and Lyft — and Gawrelski said Tesla's robotaxi could mark a new challenger jockeying for market share. However, he said the long-term structure of the industry is what's truly at stake.
There remains the question, though, of when Tesla will actually launch the service — Musk is known to show off upcoming products that are months or even years away from adoption. Musk said during Tesla's second-quarter earnings call in July that he would be "shocked" if the first robotaxi ride wasn't possible next year. But he also acknowledged he's been overly optimistic about timelines in the past.
Shweta Khajuria, a Wolfe Research analyst who's given an "outperform" rating to Uber, Lyft, and Alphabet, told BI that she expects Tesla is still a few years away from reaching full autonomy.
"Eventually, robotaxis could offer a larger threat as Tesla puts commercial use of them on the road, but Tesla is a few years away from reaching full autonomy," Khajuria said.
"That said, our analysis suggests high-single to low-double-digit percentage downside to Uber's profits even in the worst-case scenario (which arguably is a low-likelihood event) that the vast majority of the autonomous driving does not include any Uber partnership (like the one Uber has with Waymo currently) and the majority of the autonomous market share comes at the cost of Uber losing share to AVs," she added.
For now, she said the more immediate concern is Tesla's introduction of a new ride-hailing app. With millions of Tesla drivers on the road, the EV giant has the opportunity to scale its platform, she said.
"That could potentially put pricing pressure on Uber as well as Lyft that would be an increasing threat to Uber's growth, especially in the US," Khajuria said.
Uber, Lyft, and Tesla did not immediately respond to a request for comment from Business Insider.
It might not be a 'zero-sum' game
The Wedbush analyst Dan Ives, who has a "buy" rating with a $300 price target for Tesla, said that this is "not a zero-sum game."
"I don't view it as a negative for Uber and Lyft," Ives said. "I could argue it's a positive, given autonomous and FSD would openly benefit Uber through a Waymo partnership."
Ives said Tesla's robotaxi event will be a historic day for the auto industry — and it will pressure Uber to seek out more partnerships.
Uber has already taken steps toward expanding its autonomous-vehicle offerings, recently announcing partnerships with Waymo and GM's Cruise. In September, Waymo announced that its Waymo One ride-hailing service would be available to users in Austin and Atlanta exclusively through the Uber app. Waymo said the service provides over 100,000 rides weekly in San Francisco, Phoenix, and Los Angeles.
Uber CEO Dara Khosrowshahi has also expressed interest in partnering with Tesla.
"I don't think it's a zero-sum world," Uber's CEO said during a podcast interview in August.
"If you look at food, for example, you got McDonald's, Starbucks, Domino's — every single major player out there has a direct channel to consumers," Khosrowshahi said. "But as they try to maximize the utilization of their restaurants, et cetera, they have come to the conclusion that they should work with marketplaces. I think the same is going to be true of cars."
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