{"id":19332,"date":"2019-11-07T01:07:33","date_gmt":"2019-11-07T09:07:33","guid":{"rendered":"https:\/\/cleanfleetreport.com\/?p=19332"},"modified":"2019-11-07T01:07:40","modified_gmt":"2019-11-07T09:07:40","slug":"analysis-the-trouble-with-the-tesla-network","status":"publish","type":"post","link":"https:\/\/cleanfleetreport.com\/analysis-the-trouble-with-the-tesla-network\/","title":{"rendered":"Analysis: The Trouble with the Tesla Network"},"content":{"rendered":"\n<p><strong>Robotaxis\nAre Going To Be a Challenge for Tesla<\/strong><\/p>\n\n\n\n<p>Tesla\u2019s plan to launch its own <a href=\"https:\/\/techcrunch.com\/2019\/04\/22\/tesla-plans-to-launch-a-robotaxi-network-in-2020\/\">autonomous ride-hailing network<\/a> appears to be\nmoving full speed ahead as Elon Musk revealed during the company\u2019s third\nquarter earnings call on October 23, 2019, that the company\u2019s \u201crobotaxi\u201d\nfunctionality should be ready by the end of next year. Musk speculated that the\nvalue of Tesla vehicles could increase significantly, given that fully\nself-driving cars will be far more valuable to owners who can earn money\ndeploying them on the Tesla Network.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"alignleft\"><img loading=\"lazy\" decoding=\"async\" width=\"480\" height=\"288\" src=\"https:\/\/cleanfleetreport.com\/wp-content\/uploads\/2019\/11\/press00-model-x-rear-three-quarter-with-doors-open.jpg\" alt=\"\" class=\"wp-image-19335\" srcset=\"https:\/\/cleanfleetreport.com\/wp-content\/uploads\/2019\/11\/press00-model-x-rear-three-quarter-with-doors-open.jpg 480w, https:\/\/cleanfleetreport.com\/wp-content\/uploads\/2019\/11\/press00-model-x-rear-three-quarter-with-doors-open-300x180.jpg 300w\" sizes=\"auto, (max-width: 480px) 100vw, 480px\" \/><figcaption><strong>Tesla expects people to jump right in<\/strong><\/figcaption><\/figure><\/div>\n\n\n\n<p>On the surface Musk\u2019s plan may seem like a\nlogical way for Tesla to capture additional value and improve its financial\nperformance. But Tesla isn\u2019t likely to succeed in the ride-hailing market, and\nfighting what is sure to be an uphill battle is an expensive proposition. Aside\nfrom the technical challenges that remain to achieve autonomous driving,\nengaging in direct competition with the industry heavyweights, Uber and Lyft,\nmay prove even more daunting. <\/p>\n\n\n\n<p>Here are three reasons why:<\/p>\n\n\n\n<ol class=\"wp-block-list\"><li><strong>AV tech will improve the service of Tesla\u2019s soon-to-be competitors\u2014Uber and Lyft<\/strong><\/li><\/ol>\n\n\n\n<p>A common mistake among autonomous vehicle (AV)\nindustry watchers is to assume that AVs are disruptive, and therefore the\nadvent of AVs presents an opening for autonomous entrants to unseat Uber and\nLyft. While it is true that an autonomous ride-hailing service might\nout-compete the ride-hailing giants on price if they do nothing, this scenario\nis far-fetched given the powerful incentives these incumbents have to adopt AV\ntechnology. <\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"561\" src=\"https:\/\/cleanfleetreport.com\/wp-content\/uploads\/2019\/11\/Uber-in-Pittsburgh-1024x561.jpg\" alt=\"\" class=\"wp-image-19336\" srcset=\"https:\/\/cleanfleetreport.com\/wp-content\/uploads\/2019\/11\/Uber-in-Pittsburgh-1024x561.jpg 1024w, https:\/\/cleanfleetreport.com\/wp-content\/uploads\/2019\/11\/Uber-in-Pittsburgh-300x164.jpg 300w, https:\/\/cleanfleetreport.com\/wp-content\/uploads\/2019\/11\/Uber-in-Pittsburgh-768x421.jpg 768w, https:\/\/cleanfleetreport.com\/wp-content\/uploads\/2019\/11\/Uber-in-Pittsburgh-500x274.jpg 500w, https:\/\/cleanfleetreport.com\/wp-content\/uploads\/2019\/11\/Uber-in-Pittsburgh-1000x548.jpg 1000w, https:\/\/cleanfleetreport.com\/wp-content\/uploads\/2019\/11\/Uber-in-Pittsburgh-800x439.jpg 800w, https:\/\/cleanfleetreport.com\/wp-content\/uploads\/2019\/11\/Uber-in-Pittsburgh.jpg 1766w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\" \/><figcaption><strong>Uber &amp; Lyft are already well-along on their AV development<\/strong><\/figcaption><\/figure><\/div>\n\n\n\n<p>AVs are in fact a <em>sustaining innovation<\/em> to Uber and Lyft, meaning that they hold the\npotential to improve their existing service and enhance their profitability.\nAVs may help them offer safer rides at a lower cost, thereby strengthening\ntheir value proposition to riders. A shift to AVs would also allow the\nride-hailing networks to save on the largest expense they incur\u2014the cost of\nhuman drivers. As operating losses continue to mount amid price wars and the\nscramble for growth, Uber and Lyft will strongly gravitate towards innovations\nthat could improve their profitability.<\/p>\n\n\n\n<p>        2. <strong>Uber and Lyft\u2019s business model can embrace AV technology<\/strong><\/p>\n\n\n\n<p>There are plenty of examples of new\ntechnologies that bring about the downfall of incumbents because they are\nunable to adopt them. For instance, Western Union failed to adopt voice-based\ntelephony and lost its leadership position to AT&amp;T. But it isn\u2019t the\nradicalness of a technology that can prove fatal to incumbents; rather it\u2019s\ntheir inability to commercialize the technology inside their existing business\nmodels. Western Union was unable to adopt voice-based telephony because the\ntechnology could not be used over long distances at the outset, limiting the\ninitial market size and thus its financial attractiveness to a big company.\nWestern Union\u2019s <em>business model<\/em>\nrejected the new technology, not its engineers.<\/p>\n\n\n\n<p>However, in the case of AVs, Uber and Lyft\u2019s business models will welcome them with open arms since adopting AVs won\u2019t fundamentally change the way the firms make money. Assuming that Uber and Lyft choose not to directly own vehicles, the transition to AVs for ride-hailing networks is one of the easier business model changes to make. It is simply swapping out one type of resource\u2014human drivers\u2014for another\u2014autonomous \u201cdrivers.\u201d Evidence of their attractiveness&nbsp; to Uber and Lyft is the hundreds of millions of dollars per year the firms collectively spend on their in-house AV efforts.<\/p>\n\n\n\n<p>      3. <strong>Uber and Lyft can offer a more comprehensive service than Tesla       (or any all-autonomous service)<\/strong><\/p>\n\n\n\n<p>Uber and Lyft\u2019s network of human drivers will\ncontinue to be important as the transition to autonomy unfolds. Early AV\ndeployments will likely be restricted to geo-fenced areas, meaning that\nall-autonomous services will not be able to take customers outside those areas.\nIn contrast, the ride-hailing incumbents won\u2019t face such a restriction; they\u2019ll\nsimply deploy a human driver when routes extend beyond geo-fenced areas. Until\nAVs can travel everywhere, this type of hybrid network will be a significant\ncompetitive advantage over a fully autonomous service. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Not Impossible,\nBut Very Expensive<\/strong><\/h3>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"alignright\"><img loading=\"lazy\" decoding=\"async\" width=\"480\" height=\"291\" src=\"https:\/\/cleanfleetreport.com\/wp-content\/uploads\/2019\/11\/model_3_red.jpg\" alt=\"\" class=\"wp-image-19337\" srcset=\"https:\/\/cleanfleetreport.com\/wp-content\/uploads\/2019\/11\/model_3_red.jpg 480w, https:\/\/cleanfleetreport.com\/wp-content\/uploads\/2019\/11\/model_3_red-300x182.jpg 300w\" sizes=\"auto, (max-width: 480px) 100vw, 480px\" \/><figcaption><strong>Tesla is facing some entrenched competitors in its latest venture<\/strong><\/figcaption><\/figure><\/div>\n\n\n\n<p>That\u2019s not to say that Tesla will be unable to\nget the Tesla Network off the ground. But the ensuing competition with\nentrenched incumbents like Uber and Lyft will be intense and expensive. If\nTesla insists on barreling its way into the ride-hailing market, it will likely\nrequire billions of dollars of red ink. For instance, matching Uber and Lyft\u2019s\nliquidity in areas where there aren\u2019t enough customer-owned AVs will call for\nsupplementing the fleet with Tesla-owned AVs, which will entail a massive\nbalance sheet commitment. Also, Tesla will have to invest in the same type of\nexpensive customer acquisition and pricing strategies that have weighed down\nUber and Lyft. <\/p>\n\n\n\n<p>At a time when Tesla is just turning the\ncorner on profitability, that may be a price too high to pay.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Tesla isn\u2019t likely to succeed in the ride-hailing market, and fighting what is sure to be an uphill battle is an expensive proposition. <\/p>\n","protected":false},"author":89,"featured_media":18843,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_uf_show_specific_survey":0,"_uf_disable_surveys":false,"ngg_post_thumbnail":0,"footnotes":""},"categories":[2808,3401,22,25,4162,212],"tags":[4196,4228,4230,4226,4227,4224,4197,4229,63,4225],"class_list":["post-19332","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-autonomous-cars","category-car-sharing","category-electric-cars","category-future-evs","category-opinion","category-tech","tag-autonomous-cars","tag-autonomous-ride-hailing-network","tag-elon-musk","tag-lyft","tag-ride-hailing","tag-robotaxis","tag-self-driving-cars","tag-telsa-network","tag-tesla","tag-uber","infinite-scroll-item","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33"],"aioseo_notices":[],"nelio_content":{"isAutoShareEnabled":true,"autoShareEndMode":"never","automationSources":{"useCustomSentences":false,"customSentences":[]},"followers":[],"suggestedReferences":[],"efiUrl":"","efiAlt":"","highlights":[],"permalinkQueryArgs":[],"series":[]},"_links":{"self":[{"href":"https:\/\/cleanfleetreport.com\/wp-json\/wp\/v2\/posts\/19332","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/cleanfleetreport.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/cleanfleetreport.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/cleanfleetreport.com\/wp-json\/wp\/v2\/users\/89"}],"replies":[{"embeddable":true,"href":"https:\/\/cleanfleetreport.com\/wp-json\/wp\/v2\/comments?post=19332"}],"version-history":[{"count":0,"href":"https:\/\/cleanfleetreport.com\/wp-json\/wp\/v2\/posts\/19332\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/cleanfleetreport.com\/wp-json\/wp\/v2\/media\/18843"}],"wp:attachment":[{"href":"https:\/\/cleanfleetreport.com\/wp-json\/wp\/v2\/media?parent=19332"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/cleanfleetreport.com\/wp-json\/wp\/v2\/categories?post=19332"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/cleanfleetreport.com\/wp-json\/wp\/v2\/tags?post=19332"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}