Why Tesla won’t hit its AV ride-hailing goals (TSLA)

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At Tesla’s "Autonomy Day" event earlier this week, CEO Elon Musk said the company plans to launch an autonomous ride-hailing service called Tesla Network in the US by the end of next year, reports TechCrunch.

Tesla

Musk said that all new Tesla vehicles today are built with hardware and computing power necessary for fully autonomous driving. It plans to push through a software update next year, which will then enable its cars to function autonomously.

The ride-hailing service — which will launch once Tesla updates its cars’ software — will include both privately owned Tesla cars and a fleet owned by Tesla itself. Musk said the company will take a 25-30% cut of fees earned from rides provided by privately owned Teslas. He also added that the service will initially be confined to a limited geographic footprint, though he didn’t specify where.

Here’s what it means: If Tesla were to successfully launch a ride-hailing service using autonomous vehicles (AVs) by the end of 2020, it would likely be the third or fourth entrant into the US AV ride-hailing space.

Waymo, Alphabet’s self-driving technology spinoff, launched the US’s first AV ride-hailing service last December. Known as Waymo One, the firm is operating the service in the suburbs of Phoenix, Arizona.
GM plans to launch an AV ride-hailing service by the end of 2019 via its Cruise Automation subsidiary. The automaker is currently operating a pilot ride-hailing service for Cruise employees in San Francisco, suggesting that could be the location of its official launch.
Uber hassaidit would launch such a service in 2019 — but that timeframe is now in question.Uber has long eyed AV ride-hailing, but its AV endeavors have been delayed by a long line of missteps recently. In its S-1 filing, it identified AVs as a key area of future growth, but it did not offer any specifics on a ride-hailing service, negating the possibility of a 2019 launch.

The bigger picture: We believe Tesla is unlikely to meet its goal of launching an autonomous ride-hailing service by the end of next year.

The first barrier is Tesla’s AV technology. The company has eschewed LiDAR sensors, a 3D image-sensing technology that enables AVs to see the world around them, in favor of cameras and radar to help its AVs navigate.

This move has been met with skepticism in the industry: LiDAR is considered superior in gauging the size and distance of objects in motion, which is essential to safe AV operation. Without LiDAR, Tesla’s cars may need far more advanced software and computing power to give them full autonomy, and it’s not clear that Tesla’s offerings will be up to par.

Beyond technical limitations, Tesla could run into legal impediments — Musk noted several times during Autonomy Day that Tesla’s AV ride-hailing service will require approval from the federal government. However, there currently aren’t any federal laws or regulations governing AVs, just a series of non-binding regulations.

Instead, there’s a myriad of state and local regulations Tesla will likely need to comply with. Navigating such regulations will be a large and time-consuming task. In sum, Tesla’s Autonomy Day raised more questions than answers, making us doubtful that Tesla Network will be introduced by next year.

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