A Tale of Two (Robo) Carmakers

The imminent arrival of robotaxis has been repeatedly announced, always amid much fanfare. But robotaxis are taking longer to reach mainstream than anticipated and the declarations are now more measured, with mixed messages from the leading players.

There are several interesting competitors from both the technology and automotive worlds developing robotaxi technology and services. For example, Waymo with its pilot in Phoenix and the strong challenge from China testing both at home and in the US. We will consider the global race to launch commercial robotaxi services in the next installment, but for now we consider two significant automakers that have taken distinctly different positions on the robotaxi opportunity: one scaling back and one continuing to be bullish.

Daimler Blinks First

Daimler, a major contender for the development of automated driving systems has backtracked on its robotaxi ambitions by declaring it is scaling down development efforts. The company has been developing automated driving software in partnership with Bosch since 2015 and has been using Nvidia’s artificial intelligence platform for robotaxi fleets. Daimler launched its ride-hailing app and trial robotaxi service in December 2019 in San Jose, California. The service was limited to its employees and required a safety driver and a technician to be seated in the front seats.

In addition to recently acknowledging its underestimation of the complexity and cost of developing safe automated vehicles for the urban environment, Daimler cited the regulatory challenges and raised questions marks over the commercial viability of launching such services. In light of this, the company is diverting efforts from robotaxis to the somewhat simpler application of automated technology for long-haul commercial vehicles.

Loudest but Not Leading

In contrast, Tesla, known for both ambitious claims and missing self-imposed targets, still maintains that its robotaxi network is coming in 2020. Elon Musk promised a fleet of 1 million Tesla robotaxis to be deployed in 2020, but the vehicle’s full self-driving functionality has had several delays. Tesla has chosen a lonely road to automated driving without Lidar, and the company is likely to also be struggling with the same formidable challenges of automated urban driving that deterred Daimler. Tesla’s competitors are relying on expensive Lidar technology (which can cost up to $40,000 per sensor) to perceive the road ahead, while Tesla insists it can do the same with cameras and advanced computer vision processing. Although Musk has said full self-driving is coming soon, the company has not shown strong evidence that its technology is ready, confirming serious doubts that the company’s robotaxis are around the corner.

Airbnb for Ride-Sharing

To Tesla’s credit, its robotaxi network will test a different business model to its competitors. The so called Airbnb for ridesharing model is defined by the robotaxis being predominantly owned by individuals (rather than by fleets). Tesla’s market presence can be used by the existing Tesla owners that can immediately activate robotaxi functionality following an over the air update. The robotaxi owners can profit from their vehicles when not used for their own personal transportation and can earn up to $30,000 per year. Although hyperbole, this model uses Tesla’s market presence and can help kick-start robotaxi services, potentially establishing Tesla as the first player in this market.

As with human-driven ride-hailing services, a critical mass of vehicles is needed to make robotaxis a success, Tesla is in the unique position of having a fleet ready to deploy and this could be enough to get the ball rolling. However, as we will explore in the next blog in this series, there is no shortage of competition waiting in the wings.