This past May marked the first autonomous-car-related fatality -- a 40 year-old man in Florida who was driving with Tesla's (NASDAQ:TSLA) autopilot function enabled.
In this industrials segment of Industry Focus, Taylor Muckerman, Sean O'Reilly, and Motley Fool senior auto specialist John Rosevear talk about a few critical safety measures that Tesla's autopilot system was missing at the time of the crash (and to this day). Also, they take a look at how much of an impact this incident could have on the company, how they'd like to see Tesla respond, and a few concerns Tesla is going to have to address before they get much larger.
A transcript follows the video.
This podcast was recorded on Jul. 14, 2016.
John Rosevear: When you talk to the big companies, and the people working on this, there's a lot more care going into this than they think Tesla put into it. It's possibly that Tesla would come back and say, "Hey, we put a lot of care into it!" And they would say that. But, more concern around the hand off points, when you hand it back to the driver. Making sure everything works seamlessly. Making sure you really have enough sensors. I know that there was an industry insider blog that published some quotes from Toyota engineers shortly after autopilot started shipping, where they said, "We don't really think Tesla has the sensors on the car to be--"
Sean O'Reilly: (laughs)
Rosevear: Hear me out! "... lane changing safely." They need several different radar sensors, or a LiDAR sensor, stuff that really isn't commercially available. They're like, "Even when we get the sensors, which is probably going to be a couple years from now, we're not even going to ship it for a while because we have to test it, test it, test it, test it."
Taylor Muckerman: That makes sense based on the story. Tesla's basically saying that the car couldn't discern whether it was a truck or a bright sky. Because it was a white tractor trailer.
Rosevear: Yes. Right. They have got radar and other systems, a camera system looking forward, and then it was confused because it was a white tractor trailer. To which, I've had people in Detroit texting me over the past couple days saying, "Are you kidding me?" But, sure enough, the system missed it. This is where we say, there's a system called LiDAR that bounces lasers off things to give a car or some other vehicle a very detailed view of its environment at all times. A lot of the auto makers say LiDAR systems are key to real self-driving cars. There's a lot of effort going into developing better ones, more affordable ones, and so forth, that can be installed. Elon Musk says, "We don't need LiDAR. We can make up the difference with software and really good maps and so forth." And there's some question now as to whether he might have to rethink that before going any further with autopilot.
O'Reilly: Got it. Before we wrap up here, bottom line, I guess we can go around the table -- is this critical for Tesla? Do I need to run and sell any shares that I fictionally own?
Muckerman: I'll take the first stab so we can let John close us out. Personally, I don't think so. It's something that Tesla could cease, at least for the time being. These updates can all be done over WiFi in your own home. If you look at Volkswagen, for instance, they're not getting killed, and they have to ...
O'Reilly: Have to pay $15 billion! (laughs)
Muckerman: Exactly! Granted, they're a much larger company, but this can be fixed, I feel, much easier than something that Volkswagen, or Toyota, with their braking issues a year or two ago, had to deal with. I don't think this is any reason to sell the stock.
O'Reilly: Got it. Correct me if I'm wrong, anybody, but my understanding is the guy was actually watching a movie when he --
Rosevear: We don't know that for sure. There was a DVD in the car or something like that. We don't know that for sure.
O'Reilly: OK, I'll back off of that point. But, to Taylor's point, it definitely seems like this isn't critical. But I would like to see some credence given to public opinion, and maybe dialing some of this back a little bit.
Muckerman: Yeah. I think Tesla needs a little bit more answers, other than "The car got confused between a truck and a white sky."
O'Reilly: And then say: "Do the math." Anyway. John?
Rosevear: I think this is growing pains. Tesla is this scrappy Silicon Valley start-up, and as they get bigger, they're becoming a car company. The other big auto makers are like, "OK guys, if you're going to be a big car company, you have to play like a big car company. You have to test like a big car company. You have to approach the regulators like a big car company." This is a lot of what I'm hearing from people in the industry.
Is this going to kill Tesla? Absolutely not. Will the NHTSA come back and say, "OK, you have to do more or less what Consumer Reports is calling on you to do," which is, for instance, disable the auto-steering function until they can make sure people are keeping their hands on the steering wheel, and maybe stop calling it autopilot because it's not really an autopilot yet.
O'Reilly: That is a little misleading.
Muckerman: Could be, yeah. And maybe this instance, as unfortunate as it is, lends a little bit of caution to the early adopters that own Teslas and use this technology, because it's not mandatory, you don't have to use it. These people are choosing to use it. It is a risk. Risks are naturally inherent in being an early adopter. Maybe people use a little bit more caution, even if Tesla doesn't scale back any more.
Rosevear: I think that will happen. One more point about the early adopters -- Tesla's gearing up to sell half a million cars a year in a few years. They're about to move past the early adopters. The well-heeled techies who have mostly been Tesla's audience so far, yeah, they get what a beta system is. They get that the system is rough, it has limits. That's fine. They're cool with that. When my mom or your mom or whoever buys a Tesla, somebody more mainstream who isn't a professional techie, who isn't a software person, it has got to work, period. Every time.
Muckerman: Most beta systems usually don't involve death.
John Rosevear has no position in any stocks mentioned. Sean O'Reilly has no position in any stocks mentioned. Taylor Muckerman owns shares of Tesla Motors. The Motley Fool owns shares of and recommends Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.