NEW YORK: Tesla‘s resurgence is now so complete that the electric-car maker is even getting credit for others’ achievements. That, at least, is one way to read Wednesday’s stock-price movements for Elon Musk‘s company and General Motors.
Shares in Mary Barra’s $50 billon carmaker barely budged the morning after its Cruise division unveiled its autonomous robo-taxi prototype, devoid of steering wheel and pedals. Yet Tesla’s market value topped $100 billion after jumping as much as 8%, with the potential of self-driving technology helping its market capitalization triple in eight months.
There’s a lot to like about autonomous vehicles. Once fully functional and deployed at scale, they ought to significantly reduce both accidents and congestion, while electric power will cut greenhouse-gas emissions. Barra’s former second-in-command and Cruise Chief Executive Dan Ammann reiterated those benefits when unveiling the Origin, as GM‘s vehicle is called. He said using it could save the average San Francisco household $5,000 a year.
Mass adoption also promises to be a money-spinner for companies that make and operate autonomous vehicles. Imagine, for example, that robo-taxis could displace a mere 1% of the 3.2 trillion miles driven in the United States each year and charge $1 a mile – rather than the $2.50 or more human cab drivers charge – with an all-in cost of 80 cents a mile. That would yield some $6.4 billion in annual pre-tax profit for the industry at a margin of 20%, which is double what GM currently manages in the United States.
Get expenses low enough to charge less than 60 cents a mile, the average amount car owners currently pay, and the self-driving industry’s bottom line could reach hundreds of billions of dollars. Musk is pitching Tesla as being way ahead, saying it will have 1 million cars on the road this year with the potential capability to drive themselves. The idea is that once they have the software refinements and approvals necessary to do that, owners would rent them out when not using them and pay a cut to Tesla.
But getting to that stage requires all manner of regulators to get on board, insurers to devise suitable coverage and customers to get comfortable ceding full control to a collection of sensors and a computer. That still looks years off, and beyond the useful limits of a financial model. GM’s shareholders seem to understand that better than Tesla’s.