Tesla to launch paid robotaxis service next year

At Tesla’s robotaxi event on October 10, Elon Musk introduced the “Cybercab,” a two-seater vehicle without a steering wheel or pedals, fully controlled by cameras and artificial intelligence. Just two weeks later, Musk revealed that Tesla is planning to start rolling out paid robotaxi services in select cities next year.

In Wednesday’s earnings call, Musk explained that Tesla has been testing the robotaxi service in the Bay Area for most of this year. Employees have been using a prototype app to summon autonomous Teslas for rides.

These vehicles operate on the latest version of Tesla’s Full Self-Driving software, which Musk predicts will be 1,000 times better than human drivers by the second quarter of 2025. The plan is to begin offering a paid service to the public in California and Texas next year, pending regulatory approval.

“We expect driverless Teslas to offer paid rides next year,” Musk said during the call. He noted that Tesla’s ride-hailing app is already available to employees in the Bay Area.

The robotaxi Musk envisions will have a futuristic design, unlike anything currently on the road. While this concept excites some, investors and analysts were initially confused by the sporty two-seater design, which is quite different from traditional taxis that focus on carrying multiple passengers and luggage.

Musk’s latest comments build on promises made during the robotaxi unveiling earlier this month, where he mentioned plans to launch “unsupervised” self-driving in certain Tesla models by 2025. At that time, the absence of a clear business strategy caused Tesla’s stock to drop, but Wednesday’s earnings call helped regain investor confidence with projections of higher vehicle sales next year.

However, Tesla faces challenges in California, where regulatory hurdles for fully autonomous vehicles are significant. For example, Alphabet’s Waymo had to log millions of miles in testing before it received approval from California’s Public Utilities Commission to offer paid autonomous rides.

Tesla hasn’t applied for a permit to test fully driverless vehicles in California since 2019 when it last reported using a permit that still required a safety driver. The California DMV confirmed that Tesla has not requested a new permit, and the company declined to comment.

For now, Tesla’s internal ride-hailing service for employees in the Bay Area doesn’t require a permit, as employees aren’t classified as official passengers by the CPUC. However, moving to a public service will involve more regulatory steps. Musk acknowledged the difficulties, saying, “It’s not something we can fully control,” but expressed confidence, adding, “I’d be surprised if we don’t get approval next year.”

Ross Gerber, a Tesla shareholder and CEO of Gerber Kawasaki Wealth and Investment Management, pointed out that navigating regulators is never easy, and no one should expect it to be “a simple process,” Reuters reported.

While California has stricter rules, Texas, where Tesla also plans to launch, has fewer barriers for autonomous vehicles. However, companies often spend months or even years testing before launching paid services in new markets.

Musk also mentioned that a national approval process for autonomous vehicles would make things smoother, as current regulations vary from state to state.

Tesla’s Full Self-Driving technology, which is key to its robotaxi ambitions, has faced scrutiny from regulators. Last week, the National Highway Traffic Safety Administration (NHTSA) opened an investigation into 2.4 million Tesla vehicles equipped with Full Self-Driving after reports of crashes, including one fatal accident earlier this year.

Despite these challenges, Tesla’s robotaxi plans made waves in the industry. Shares of Uber and Lyft dropped by 2.3% in after-hours trading, as the competition from Tesla’s upcoming autonomous fleet sparked concerns among investors.