Why Elon Musk's latest Tesla robotaxi promise is unlikely to deliver

By Therese Poletti

Full self-driving technology is still years away from realization, experts say

Elon Musk's latest proclamation that Tesla robotaxis are coming on Aug. 8 is probably going to be a setup for more disappointment for investors.

In typical Musk fashion, last Friday he vague-tweeted "Tesla Robotaxi unveil 8/8." For many investors, this brought back memories of one of Musk's most infamous, undelivered promises, when he said in April 2019 that Tesla (TSLA) owners would see their vehicles morph into a fleet of robotaxis within the year. Five years later, the plans for an app-managed Tesla robotaxi fleet to defray the cost of car ownership have yet to materialize.

If anything, autonomous vehicles seem to be further away from the ultimate goal of being fully self-driving, and the robotaxis in existence have been beset with issues and are still a long way to problem-free rides.

"They are clearly years away from getting there," said Philip Koopman, associate professor of electrical and computer engineering at Carnegie Mellon University, who also focuses on the public safety of self-driving cars. "Look at how long Waymo has been at it. Cruise said they were ready and it didn't turn out for them. This is a multi-year problem."

Also read: Robotaxis remain a pipe dream and greedy companies only have themselves to blame.

In Tesla's situation, its currently available Full Self Driving package still requires "active driver supervision" and does "not make the vehicle autonomous," according to its website. The company charges an additional $12,000 for the feature. Tesla also offers Autopilot for $6,000, which includes lane-change capability and traffic-aware cruise control. Just this week though, Tesla settled a lawsuit filed by the family of a Silicon Valley engineer who was killed when his Tesla, on Autopilot, veered out of a freeway lane and accelerated before crashing into a barrier.

Musk made the cryptic robotaxi announcement on the same day that Reuters reported that Tesla had scrapped its plans for a long-promised, lower-cost electric vehicle, known as the Model 2. Musk denied the report by saying "Reuters is lying," but the timing of his tweet has led to speculation that Tesla could possibly instead offer a stripped-down model for its robotaxi.

Vicki Bryan, founder and CEO of the Bond Angle LLC, said in an email that while it is unclear whether plans for the Model 2 have been scrapped or not, there is "little evidence that it is aggressively in progress, as we would expect for a car due to start producing at commercial scale at the end of next year, per Elon's latest dubious promise."

She added that at least the Model 2 is plausible, while the robotaxi is not. "Tesla does not possess the technology to transform existing Teslas on the road into self-driving vehicles as promised for years, nor is it ever likely to, in my opinion," she said.

"In a robotaxi, no one inside the car has to intervene to ensure safety," said Koopman. "To do that, whatever software is in there has to nearly perfect. It is very clear that FSD [Full Self Driving] is not there. Strong claims require strong evidence - where is the evidence? I don't know."

In the self-driving race, Alphabet Inc.'s (GOOG) (GOOGL) Waymo is the farthest along, with 20 billion miles driven by its fleet of cars, and it is now running commercial robotaxi services in San Francisco and Phoenix. This week, it started service in Los Angeles. Austin is coming soon. But even it is not perfect: In February, a Waymo driverless vehicle collided with a cyclist in San Francisco at a four-way intersection, where the cyclist was initially blocked from view by a truck. The crash caused minor injuries to the cyclist and is under investigation.

GM's (GM) Cruise is in the process of restarting its self-driving operations, after suspending its operations last October following an incident in San Francisco in which a Cruise driverless car struck and dragged a pedestrian 20 feet. Cruise's driving permits were revoked, after the California Department of Motor Vehicles said it misrepresented information about the safety of its technology.

Initially in its comeback, Cruise will be operating with human drivers.

"This is a multi-year problem," Koopman said of the race to get to full self-driving. "Any claim of 'we are going to solve it right away, even though we clearly haven't solved it, but in less than 12 months it will be solved and then ready to scale,' is just not a credible claim by anyone," he said. "I see no evidence that that is achievable by anyone anytime soon. Nobody is close."

In Tesla's case, the company still does not use Lidar, a vision technology that is key to seeing all around the vehicle. "So not using Lidar saves you money, lets you have a bunch of cars at scale because they cheaper, and easier to scale," Koopman said, adding that trying to build a robotaxi without Lidar is "trying with your hand tied behind your back." He said the best way to deal with this problem for now is to use "every available sensor we have" and then eventually talk about cost reduction.

It's entirely plausible that Musk will instead roll out some kind of a Tesla-designed, so-called "toaster" type robotaxi, without a steering wheel or brake pedals, and say that the software will be forthcoming, Koopman said.

"The hard part is the software, and we don't see them ready to deploy the software without a human backup," he said. "The software is the hard part."

Musk could be once again setting up Tesla for more dashed expectations, at a time when the company's EV business is struggling with overproduction, sluggish demand and major competition from China, to name just a few issues. On top of that, the company's stock is down about 29% so far this year, far underperforming the S&P 500 SPX.

Jeffries & Co analyst Philippe Houchois said in a note this week - a note that mostly focused on Tesla's upcoming annual meeting and governance issues - that the robotaxi event on Aug. 8 may help sentiment but it will "not address the timeframe and investment needed to render the technology and business model viable."

Investors should be prepared to be disappointed again on Aug. 8. If Musk unveils something with actual substance, it will be a pleasant, if unlikely, surprise.

-Therese Poletti

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04-13-24 0747ET

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