Elon Musk thinks Tesla can succeed where GM, Google can’t

It is undeniable to point out that a large focus of Tesla's (TSLA) second quarter 2024 earnings call on July 23 was not about the company's EVs like the Model 3, Model Y or the Cybertruck, but ambitious efforts toward artificial intelligence and autonomous vehicles, especially Robotaxis.

"The value of Tesla overwhelmingly is autonomy," CEO Elon Musk declared during the earnings call. "These other things are in the noise relative to autonomy."

Musk and Tesla may have a grand vision regarding robotaxis, but they have relatively tough competition to overcome.

Musk's grand Robotaxi

On the call, Musk acknowledged that the Robotaxi product unveil has been delayed from August 8 to October 10, noting that the extra time would allow for Tesla to make "some important changes" to the design of the vehicle, as well as give the company an opportunity to "show off a couple of other things," which Musk did not dive further into.

Canaccord Genuity analyst George Gianarikas asked Musk about General Motors' (GM) decision to stop producing the Cruise Origin, a bus-shaped autonomous vehicle without pedals or steering wheels.

In a letter attached to its earnings this week, CEO Mary Barra suggested that modifying a more traditional vehicle like the upcoming Chevrolet Bolt EUV would be easier in the eyes of government regulators and cheaper to make.

“This addresses the regulatory uncertainty we faced with the Origin because of its unique design. In addition, per-unit costs will be much lower, which will help Cruise optimize its resources.”

Though the design of the actual upcoming robotaxi is under wraps, many believe that Tesla's vehicles will feature no pedals or steering wheels to control the car, which may place Musk's firm in a regulatory nightmare.

However, in typical Musk fashion, he downplayed the issue and sent shots at his rivals.

"Well, obviously, the real reason that they canceled it is because GM can't make it work, not because of regulators, they're blaming regulators," Musk said during the earnings call.

"That's misleading of them to do so, because Waymo is doing just fine in those markets. So it's just that their technology is not at par.”

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Another analyst, Pierre Ferragu from New Street Research, asked Musk about the scalability of his robotaxi project, which garnered another creative, open-ended response from the figurehead.

Musk alluded to a "network" of Tesla vehicles in the range of "over 10 million and over 20 million vehicles" running 24/7 and operating on a unique structure.

"If you can think of the driving fleet of Tesla vehicles as like a giant sort of Airbnb equivalent fleet -- Airbnb on wheels," Musk said.

"I mean in addition, we would make some number of cars for Tesla that would just be owned by Tesla and be added to the fleet. I guess that would be a bit more like Uber. But this will all be a Tesla network."

In a note published early on July 24, the day after the earnings call New Street downgraded Tesla from a "Buy" rating to "Neutral."

The competition is alright

Musk's comment and explanation for his robotaxi vision comes at a time of great investment into what would ultimately be Tesla's direct competition.

Though General Motors has disclosed that it lost $458 million on Cruise in the last quarter, the automaker announced last month that it is pumping in $850 million as part of its continued commitment.

The outsized sum was to be used to cover Cruise’s operational costs as it resumes testing of its autonomous vehicles, GM's CFO said, following a major incident involving a pedestrian in San Francisco in October 2023.

But while the Cruise Origin's development pause is also expected to save a large sum for the GM-adjacent company, not everyone is on board with the idea.

Former Cruise CEO Kyle Vogt, who resigned in the aftermath of the October 2023 crash, criticized GM on social media, saying it "Would have been amazing for cities."

"GM repeatedly finds themselves with a 5-10 year head start, but then fumbles the ball, shuts things down, and loses the lead," he posted on X (formerly known as Twitter.) "Anyone remember the [GM] EV1? It's like someone keeps letting them look into a crystal ball and then they go, 'nah, we're good.'"

On July 23, Google's parent company, Alphabet Inc., (GOOGL) , announced a $5 billion multi-year investment in its self-driving subsidiary, Waymo.

The investment comes as Waymo plans to expand its robotaxi coverage and presence in San Francisco, Los Angeles, and Austin, Texas.

"This is consistent with enabling Waymo to build the world's leading self-driving technology," Alphabet CFO Ruth Porat said during its earnings call on July 23.

Tesla Inc., which trades on the NASDAQ as TSLA is down 10.7% from the closing bell, trading at $220.02 at the time of writing.