Tesla to launch self-driving taxis in August, can Uber and LYFT investors still sit?

Elon Musk, CEO of American electric car giant Tesla, revealed in a post to X in early April that autonomous taxis will be unveiled in August. As soon as this news comes out, it will clearly form a direct competitive relationship with ride-sharing companies such as Uber (NYSE: UBER) and Lyft. If Tesla can use its own cost advantage to fight a price war with Uber and Lyft and become the market leader, this is exactly what Tesla's autonomous taxi strategy ultimately wants to achieve.

Tesla Inc. (Tesla Inc.) is an American automobile manufacturing company headquartered at 1 Tesla Road in Austin, Texas, USA, founded in 2003. According to Tesla's official website, the company will provide a one-month free fully automatic driving (FSD) experience to new car buyers in the US and Canada. This move has fully aroused the public's desire to buy a Tesla.

At the beginning of April, Musk revealed on social media platform X that on August 8 this year, the world will launch Tesla's robotic taxi for the first time, known as Cybercab. Musk also said that Tesla's cumulative investment in training computing, data pipelines, and video storage will exceed $10 billion this year.

So why is autonomous driving getting so much attention?

Tesla relies on powerful vision algorithms to achieve pure vision autonomous driving without relying on other sensors. Since there is no need for other sensors such as lidar, Tesla models have drastically reduced the cost of autonomous driving hardware. This not only enabled the rapid spread of autonomous driving technology in the passenger car market, but also provided an affordable autonomous driving experience for mass consumers. Therefore, it has received a lot of attention from the public.

Tesla's stock price rose significantly after the news was announced. At one point, the increase extended to 5% and hit 174 US dollars per share.

However, Tesla stock experienced a decline of more than 25% in 2024, and its Q1 performance was not ideal. Revenue fell 9% year over year, gross margin fell from 19.3% to 17.4%, and its revenue, gross margin, and earnings per share all declined. It can be seen from this that Tesla is currently burning cash, and free cash flow is negative.

Although Tesla has scheduled the Robotaxi event for August, it is expected to launch in the first half of 2025 or even the end of this year. But if we want to get on the road, it is estimated that it will be until 2027.

Not only that, Cybercab also faces a number of issues. Examples include legal and regulatory issues, road safety issues, technical maturity issues, etc.

Currently, the laws and regulations on driverless technology in various countries have not been perfected, and it is impossible to clarify the legality and responsibility of driverless taxis on the road, which also gives consumers more concerns. In addition to this, there are also technical challenges. Although Tesla is expected to launch Cybercab, the issue of technological maturity is still a major issue. So how usable Cybercab will be is unknown right now.

Uber (UberTechnologies, Inc.), translated in Chinese as “Uber,” is a technology company based in Silicon Valley, USA. Founded on August 9, 2010 and headquartered in San Francisco, California, USA, it is a multi-faceted platform that relies on technology development and maintenance to build a bridge between consumers who need to travel by car and independent car owners who provide on-board services, and provide consumers with travel options, including public transportation, bicycles, and scooters.

Uber has also made significant progress in diversified transportation services. Last year, it partnered with Waymo, a subsidiary of Alphabet Inc., to expand its range of services, including options such as two-wheelers, taxis, ride-sharing, and autonomous ride-sharing. The results of the cooperation were remarkable, successfully attracting new users and increasing the frequency of rides.

Uber's takeout business and ride-sharing business can be said to be Uber's “two legs”. During the pandemic, takeout became Uber's main source of business revenue. After the pandemic ended and people's demand for travel continued to recover, Uber's ride-sharing business and takeout business became the “two-wheel drive” for Uber's revenue growth.

But abandoning self-built driverless car technology is an obvious fact. As a result, Uber will be passively beaten if a competitor brings fully autonomous cars to the masses.

According to Uber's first-quarter earnings report, the operating profit for the first quarter of 2024 based on GAAP was US$172 million. The total number of bookings exceeded expectations, and the frequency of orders reached a record high. Uber also achieved impressive results in the delivery business. The total number of bookings in the first quarter exceeded expectations, and the order frequency reached the highest level in history. Judging from Uber's stock price, it has risen nearly 90% over the past year, surpassing the performance of the S&P 500 index.

Lyft was founded in 2007 and is headquartered in San Francisco, USA. It is the second-largest ride-hailing service platform in the US after Uber. As a local US company, its business is mainly shared business (online car-hailing, bicycles, scooters, etc.), and its revenue mainly depends on collecting service fees and commissions from drivers.

According to financial reports, Lyft's revenue for the first quarter was US$1.3 billion, up 28% from US$1 billion in the same period last year, and also increased compared to US$1.2 billion in the previous quarter. Lyft's first-quarter results were better than Wall Street analysts' expectations. The outlook for total bookings and adjusted EBITDA for the second quarter also exceeded expectations, thus driving its share price to rise sharply by more than 6% after the market. Lyft expects total bookings for the second quarter to be around $4 billion to $4.1 billion, higher than market expectations of $3.98 billion. The company said it is still expected to generate positive free cash flow throughout the year.

Self-driving taxis are at the core of Musk's long-term strategy, so Tesla has increased its investment in this field. According to his description, Tesla owners can rent cars to earn money for themselves. The business model is similar to Airbnb (NASDAQ: ABNB).

Theoretically speaking, this would pose a major threat to current ride-sharing companies. After all, the biggest cost of a mobile ride-sharing network is the driver himself.

It sounds scary, but investors in Uber and Lyft don't need to rush out right now.

Let's first talk about Musk's “dark history” in terms of autonomous taxis and software promises for fully autonomous vehicles. Musk has been advocating this future every year for nearly 10 years. For example, eight years ago in 2016, he said that every car sold by Tesla would be equipped with the computing hardware necessary for autonomous driving, but this promise has not been fulfilled until now.

In view of this, we cannot “take it all” with regard to Tesla's promise of introducing autonomous taxis in 2024 and disrupting the ride-sharing industry.

In contrast, the one that poses a greater threat to Uber in the short term is actually Waymo. The company already provides fully autonomous ride-hailing services in 4 US cities (Phoenix, San Francisco, Los Angeles, and Austin, Texas). If it obtains business licenses in more cities in the future, Uber's market share may slowly erode over the next 5 to 10 years. Uber investors should therefore keep a close eye on Waymo's latest developments.

Another risk could be Uber's valuation. The stock currently has a price-to-market ratio (P/FCF) of 42, and there is a valuation premium.

Therefore, in this context, we can keep an eye on stock market trends through the BiyaPay App, a multi-asset trading wallet. You can invest in US stocks by depositing digital currency (USDT) to BiyaPay, a multi-asset wallet, and then withdrawing fiat money to other brokerage firms (such as Jiaxin Securities). You can also search for stock codes directly on the platform to make purchases. At the same time, investors can regularly monitor stock prices according to their own investment strategies and buy or sell stocks at the right time.