Tesla (TSLA +0.28%) may be competing soon with Uber (UBER 2.17%). That's the plan, at least, with autonomous (self-driving) robotaxis at the center of Tesla CEO Elon Musk's long-term strategy. Musk is doubling down on investing in robotaxis and wants to roll out a more advanced model to consumers with no steering wheel, perhaps this summer. The eccentric CEO says that Tesla customers will be able to rent out their Teslas as self-driving taxis to make money, similar to Airbnb.
If Tesla is successful in getting a fleet of robotaxis to market, that could spell trouble for existing ride-sharing networks such as Uber and Lyft. But should investors of ride-sharing companies have genuine concerns about Tesla and robotaxi disruption? Let's take a closer look at the facts.
Tesla promises self-driving taxis
Tesla is putting an emphasis on robotaxis once again in 2024. During the first-quarter 2024 earnings call, Musk said that in August the company would be unveiling a new vehicle "purpose-built" as a self-driving taxi. In theory, this could present a large threat to existing ride-sharing networks such as Uber. The largest cost to mobile ride-sharing networks is the drivers themselves. If you could operate a fleet of self-driving taxis, that network could undercut Uber (as well as its smaller competitor Lyft) and still generate a profit. This is what Musk is trying to achieve with Tesla's robotaxi strategy.
Even more concerning, Uber ended its self-driving research back in 2020, selling the division to another autonomous driving start-up, Aurora. It does have a partnership with Alphabet's self-driving division, Waymo, but it has clearly given up on building self-driving car technology itself. That puts Uber in a vulnerable position if -- and this is a big if -- a competitor can bring fully autonomous vehicles to the masses.
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Look at the facts, not false promises
The self-driving threat sounds scary for existing ride-sharing players such as Uber and Lyft. Investors following Musk lately might think that this is an existential risk for Uber's business that could tank the stock price. The reality is much less scary, however.
For close to a decade now, Musk has been promising investors that a robotaxi and fully autonomous vehicle software was just around the corner. For example, in 2016 -- eight years ago -- Musk said that every Tesla sold going forward would have the computing hardware necessary to be a self-driving vehicle. That has not panned out so far. Tesla even has a partnership with Uber to offer its cars to drivers at a discount. While this has nothing to do with self-driving technology disruption, the companies have a relationship.
Perhaps 2024 is the year that self-driving Teslas finally arrive for consumers. I would take Musk's words with a grain of salt. He has essentially promised this every year for the past decade and still hasn't delivered on it. Investors have every reason to be skeptical of Tesla robotaxis arriving in 2024.
UBER Price to Free Cash Flow data by YCharts.
Should Uber investors worry about Tesla robotaxis?
Uber investors shouldn't worry about Tesla robotaxis. Unless you think that 2024 is the year Tesla finally solves self-driving vehicle software, selling Uber stock due to Tesla robotaxi fears seems like an overreaction.
What may be a larger concern in the short term is Waymo, Alphabet's self-driving division. The service is actually operational, albeit in enclosed areas, in four cities (Phoenix, San Francisco, Los Angeles, and Austin, Texas). If Waymo can get licenses in more cities around the country, the service could start to take market share from Uber over the next five to 10 years. Investors in Uber should pay full attention to Waymo and what cities it launches in next.
Another concern might be Uber's valuation. It trades at a price-to-free-cash-flow (P/FCF) multiple of 42, which is a premium valuation. In light of that, a potential Waymo expansion could be a major headwind for Uber's stock price. But Tesla robotaxis shouldn't pose a concern.
