Tesla Inc. (NASDAQ: NASDAQ:TSLA) has reportedly scrapped plans for a low-cost car, opting instead to pursue the development of self-driving robots. The strategy shift comes amid significant technical and regulatory challenges facing the autonomous vehicle industry.
The news broke last Friday when Tesla CEO Elon Musk responded to a report by saying on his X.com platform that “Reuters is lying (again),” without specifying any inaccuracies. Tesla did not immediately comment on the progress of the development of these self-driving cars. However, Musk did announce that “Tesla Robotaxi is launching on August 8.”
The move into robotaxis is seen as a riskier endeavor for Tesla, the world’s largest electric vehicle (EV) maker, given the complexity of the technology involved. A Carnegie Mellon University professor specializing in self-driving car safety said the industry has underestimated the time it will take to develop autonomous vehicles, with projects initially thought to take years now stretching into decades.
The autonomous driving sector has faced setbacks, as evidenced by the shutdown of Ghost Autonomy’s operations on Wednesday amid concerns about profitability. Similarly, General Motors’ (NYSE: GM) autonomous unit Cruise faced regulatory scrutiny after a pedestrian-related incident last fall, prompting the company to cut jobs and slash spending by $1 billion.
Tesla’s approach to self-driving technology, which relies on radar and cameras without lidar, has been met with skepticism. Lidar offers advantages such as operating in different lighting conditions and greater range, while cameras provide superior image recognition.
Valuing a robotaxi business is more complicated for Tesla than a low-cost car, according to some investors and analysts. John Krafcik, former CEO of Waymo, Alphabet’s (NASDAQ: GOOGL) autonomous driving technology company, noted that Tesla has been working toward full autonomy for years without achieving it.
Tesla’s Autopilot and Full Self-Driving systems, which assist with driving tasks but are not automated, have come under scrutiny. In December, Tesla agreed to recall more than 2 million cars with Autopilot to address safety concerns from U.S. regulators, despite disputed claims.
The recall follows an investigation by the US National Highway Traffic Administration into crashes involving the technology.
Furthermore, Tesla is facing a criminal investigation by the US Department of Justice over claims that its vehicles can drive themselves. The company has repeatedly warned drivers to maintain control and that Autopilot does not make the cars autonomous.
A University of South Carolina professor with expertise in autonomous vehicle law said Tesla vehicles are currently incapable of supporting a true robotaxi service. The company also has to navigate federal and local regulations for taxi fleets and self-driving testing, as well as unresolved liability issues for driverless cars.
Despite the challenges, if Tesla succeeds in developing robotaxis, it could expand its market to a wider range of consumers beyond those who can afford its more expensive models. Jamie Meyers, an analyst at Laffer Tengler Investments, which holds Tesla shares, expressed confidence in Tesla’s engineering capabilities and the potential appeal of a robotaxi service under the Tesla brand.
Source: Investing
