Could the robotaxi model that Tesla’s Elon Musk has been touting be a successful approach for a Mobility as a Service (MaaS) model? After some recent first-hand experience with the Tesla driving experience, MaaS champion, Princeton’s Dr. Alain Kornhauser states why he believes Musk be on the right path. In the above video, Kornhauser provides an overview of some of the innovative human-machine research initiated at the 2019 SmartDrivingCar Summit, the importance of community acceptance of autonomous vehicles and, at approximately 03:55, the discussion of Tesla as a MaaS provider.
As Kornhauser mentions, it’s plausible to believe that such a service could quickly scale to something like 2.5% of the daily U.S. rides. As he notes in the above interview, that would equate to a little more than 60% of today’s public transportation ridership.
It’s not difficult to see how the dollars could add up for Tesla. For example, if they were to charge, say $2 per ride (which is 80% of a Silicon Valley bus fare) and provide, say 25 million rides per day, Tesla would generate an incremental $50M daily or over $15B annually (this is consistent with the $30B revenue calculated in this MaaS model, which assumed 5% market share).
Of course, for a Tesla MaaS, there would be commissions to pay the owners of cars and there would be challenges of keeping cars fresh and clean. As Kornhauser points out, part of the “commission” that Tesla might pay owners could be in the form of non-monetary payments, such as free maintenance, free cleaning (always have a fresh car smell), free charging, no-cost upgrades, no-cost rentals, etc.
It has already been suggested that Tesla’s new lease program, whereby the Tesla vehicle reverts to Tesla at the end of the lease period (with no option for the lessee to purchase it after the end of the lease), is another way for Tesla to capitalize its Mobility as a Service model. With this approach, Tesla doesn’t have to incentivize owners to put their vehicles into Tesla’s MaaS pool, as Tesla would ultimately own and control the disposition of those vehicles (while keeping them off the resale market). And if the vehicles “last a million miles”, then Tesla’s marginal capital costs approach zero.
It’s clear that Tesla is trying to vertically integrate on other fronts, which could be helpful in rolling out MaaS and reducing costs. Recent announcements about self-insuring and a broadband network from another Musk company, SpaceX, could provide operational cost reduction. Similarly, these activities could lead to new revenue opportunities, such as selling origination-destination data or becoming a full-fledged telecom provider (the vehicles themselves might serve as mobile, wireless base stations).
Tesla could leverage its electric skateboard platform to create vehicles specifically for shared transit applications. In fact, this future is hinted at in an image provided in The Boring Company’s recent announcement of a $48M deal with the Las Vegas Visitor’s Convention Bureau. Included in that urban connector project is an electric, autonomous people mover that will ferry up to 4,400 people per hour on a 1.5-mile loop under the streets of Las Vegas [here is this author’s analysis of the economics of a point-to-point connector for train station to airport connectivity].
Transitioning from a goods to a service company is not an easy one for any company. For Tesla it has the additional challenge of a product line that arguably hasn’t crossed the chasm to mainstream adoption (see this WSJ article) and may not generate the cash flow necessary for such an ambitious agenda. With that said, Tesla has been successful in the past at convincing investors of the long-game and this author wouldn’t underestimate Elon Musk as he attempts to steer his Tesla ship from vehicle manufacturer to a vertically integrated MaaS.
The financial and, as Kornhauser stresses in the above interview, the technical challenges, are secondary to the “soft” issues, surrounding the human-machine interface (see this video for an overview of some of the research at the SmartDrivingCar Summit) that needs to be solved to be a successful MaaS. A major focus of the 2019 SmartDrivingCar Summit was on these soft issues and, as pointed out in the above video, Katherine Freund, founder of ITNAmerica, which offers door-through-door mobility, provided real-world insight of who and how their existing service is utilized. Her organization might be an interesting partner if Tesla wishes to serve a broader market.