When will Elon Musk's Boring Company build its first working, commercial-scale "Loop" subway tunnel, and morph from a billionaire's science project into something more resembling a real-world business?

We used to think Boring's first success would come in Chicago. Indeed, back in June 2018, that city awarded Boring a contract to build a "Loop" subway system connecting Chicago O'Hare Airport to the city's downtown Loop district, with an expected time to completion of just 18 months. 18 months and one Chicago mayoral election later, however, and the Chicago "Loop" no longer looks like such a sure thing. 

Now it appears that Boring's first commercial success will arrive a bit south and west of the Windy City ... in Las Vegas, to be precise.

Welcome to Fabulous Las Vegas Nevada sign

Image source: Getty Images.

Details to come

We know this thanks to The Boring Company itself, which last week announced that "the Las Vegas Convention and Visitors Authority (LVCVA) Board of Directors approved a contract with The Boring Company to design and construct a twin-tunnel Loop system for the Las Vegas Convention Center (LVCC)" -- which Loop system is now already under construction.

This isn't a huge project, mind you. Running the length of the 200-acre convention center, its stated aim is simply to cut the "typical walk time between the New Exhibit Hall to the existing North/Central Hall" from "up to 15 minutes" currently to "approximately 1 minute." (LVCC, however, perhaps attempting to play up the project's attractiveness, says the actual walking time can be as long as 45 minutes due to delays caused by construction). In any case, with a total length of less than one mile, the Las Vegas Loop will actually be shorter than Boring's original demonstration tunnel in Los Angeles, which stretches 1.14 miles in length. 

Nevertheless, the LA tunnel is more a proof of concept than an actual business project. In Las Vegas, Boring is expecting to collect actual revenue for its work -- perhaps as much as $53 million -- in Boring's "first commercial endeavor."

This, too, is a departure from the terms of the Chicago Loop project, which had proposed having Boring build the tunnel on its own dime, and collect its profits from operating the travel system on a concession basis. In Las Vegas, LVCC plans to operate its Loop free of charge.

What it means for The Boring Company

Not to put too fine a point on it, but for The Boring Company to become a viable business (much less a future candidate for IPO), the company needs customers -- and revenue. In Las Vegas, Boring finally appears to have found both. While it remains true that to date, neither Musk nor Boring have expressed any clear desire to "go public," evolving from a clever concept into a revenue-generating business would seem to, at the very least, make this a realistic possibility at some point in the future.

What it means for Tesla

And what about Tesla (NASDAQ:TSLA), the Elon Musk company that has gone public and the one that investors can invest in today? What does Boring's first contract mean for it?

Honestly, not a whole lot -- at least not initially. According to data from S&P Global Market Intelligence, Boring is privately owned by Musk, with investments from a handful of minority shareholders -- none of which is named "Tesla." As such, no matter how successful Boring eventually becomes, none of that success will accrue directly to Tesla.

That being said, within its Loop tunnels, Boring intends to transport passengers aboard "autonomous electric vehicles" built by Tesla, which will include standard Model 3 and Model X vehicles, as well as a Model X with a chassis "modified ... to transport up to 16 passengers with both sitting and standing room." 

With Tesla vehicles being the only vehicles currently compatible with Boring's Loops, this makes Boring a sort of captive audience for Tesla, and a guaranteed source of future income. The more popular Boring and its Loop tunnels become on the market, therefore, the better for Tesla's future sales. And if one fine day, Boring should become so popular that it wins more and more contracts, building longer and longer transportation systems able to accommodate more and more Tesla vehicles within them ... why, that could be very good news for Tesla indeed.

But first, let's see how this initial Las Vegas project turns out. We shouldn't have too long to wait -- LVCC plans to hold its Loop grand opening by January 2021.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.