In the long run, you won’t be able to buy a Tesla anymore
Once autonomy is solved cars will be so valuable for Tesla that they will produce them for themselves and not for us. Also, at some time, who will want to own a car anyway? I’ll tell you why.
Today, Tesla’s largest profit comes from selling cars. Last year they sold 936,172 vehicles of their 4 models available. This is a year-over-year growth of more than 87% which is remarkable and a record for the car industry in these volumes.
Also, last year, Tesla launched their FSD beta program to selected customers with a high safety score and they reported over 60,000 users during Q4 investor’s conference call.
These two factors, high production output and the development of the FSD technology are taking Tesla to its next stage.
In 2016, Elon Musk published his “Master Plan, Part Deux”. In this document, Tesla proposed that their cars could serve as a ride-hailing service to customers all over the world. Not only in selected geofenced areas, not only in large urban and suburban areas but everywhere.
The whole idea is to provide people with a reliable service such that they won’t need to own a car anymore.
In this situation, and once costs come down since electricity is cheaper than gas and labor is the main cost of these services, using these vehicles is going to be a lot cheaper than the property cost of owning them.
Also, Elon Musk has been warning customers about how expensive FSD is going to be once it reaches level 4 or 5 autonomy. He has thrown figures as high as $200,000 as the car will become so much reliable and useful creating for the owner lots of free time that can be valued in money. Besides, Tesla proposed that once FSD sells for this premium price, owners will be able to redeem part of this price lending the car to Tesla so it can be used as a robotaxi in the hours it is not used by its owner.
We have to bear in mind that we are talking about a much safer way of transportation that will let customers take a ride on their house’s front porch and go anywhere. Just open the Tesla app, choose where you want to go and how many people will be riding and in a matter of a few minutes, an autonomous car will be there to pick you up. Once the destination is reached, leave the car and the payment will be automatically processed.
Going on vacation? Say so in the app a few hours in advance and a fully charged, oversized vehicle will come to pick you, your family, and your luggage up and take you to the beach. You may be able to choose a vehicle where you could go sleeping on a long trip by night. Today we don’t realize how closer some destinations could be in the future. We think car transport is limited by speed but once autonomous cars are the only ones on the roads, and their safety is proven, they might be allowed to drive at much higher speeds than they are today. Also if you can go sleeping, not only they won’t need to stop, but also your perception of time will be less as you won’t be losing your free or work time on transport.
Raid-hailing could soon compete on medium distance with planes or trains because the door-to-door advantage will save you commuting time from the airport or train station.
And what about the price?
Tesla is confident that they could bring the costs down to $0.18 per mile and although they want to charge around $1.00 per mile at the beginning, time will bring these prices down.
We can expect lower than Uber or Cabify fees at the beginning, but once this service is ubiquitous, its price will come down significantly to compete with self-owned cars and other means of mass transportation, both urban (as city buses or subway) and long-distance.
It is probable that in the long run, we could see subscription models as we have today with so many services. It won’t be a fixed rate for everybody but, in the beginning, many options will be available, and, with time, a more simple scheme will reach the market to simplify the process.
It could be feasible to have a $300 per month rate for a worker to commute to work every day (40 miles per day x 20 days a month). Compared to the total cost of ownership and operation of your own car, including car price, maintenance, energy, and parking space, it cuts it at least in half depending on several factors and, based on the $0.18 per mile cost, still will give Tesla more than a 100% profit.
You need to go on a weekend trip with your family to a 200 miles far destination, you might pay as low as $150. In today’s vehicles, this money would just reach for a little more than the gas cost. Again 100% profit for Tesla.
These low prices are not expected to be like this in the beginning, but once road transport reaches the commodity status, they for sure will get this low.
The main argument here is not that car companies like Tesla won’t sell you cars, but instead, people won’t need to own cars for personal transportation anymore. It will not make economic sense.
Also, when this becomes common, every ride-hailing car will replace at least 5 personally owned cars freeing up millions of square meters of parking space both in the cities and at homes making not only a most efficient transport system but also increasing real state space and city space for other uses.
Of course, there will still be a necessity for owning vehicles, but it will be for a more professional reason. You might need a van or a pick-up to carry your tools or goods around, but for personal transportation, it won’t make sense anymore.