Recently, Tasha Keeney of ARK Invest explained the potential she saw in Tesla launching its own ride-hailing network later this year — assuming that it would use human drivers. Keeney sees many benefits for the potential ride-hailing network, including:
- A human-based ride-hailing network would would give Tesla experience within the ride-hailing environment before its eventual move — hopefully — into a full robotaxi network.
- Electric vehicles are more cost-effective per mile to drive.
- Uber and Lyft’s pricing structure shows users may be willing to pay a premium to ride in Tesla vehicles.
- Tesla could offer special financing for vehicle purchases to drivers who would operate on its own ride-hailing network.
- Additional mileage driven on Tesla vehicles means additional opportunities to gather data for Full Self Driving.
You can see Keeney’s full reasoning and breakdown here, including how much money the Tesla Network could bring to Tesla’s bottom line. She lays out a clear, compelling business case for it.
In the past, I’ve sort of dismissed the idea of a Tesla Network with drivers, but hearing Keeney describe it made me think of … Bojack Horseman?
The Cabracadabra Advantage
If you don’t know the Netflix series Bojack Horseman, it’s an incredible series that addresses depression, anxiety, and addiction through incredibly wacky scenarios. It’s often wildly inappropriate, but it uses its scenarios to satirize real life in a way that has made it one of the most respected animated series ever.
Throughout the series, Bojack’s roommate, Todd Chavez, pitches seemingly crazy business ideas to his friend and Hollywood star Mr. Peanutbutter, who financially backs them. The Tesla Network made me think specifically of Chavez’s idea in the Season 3 episode “Stop the Presses” — Cabracadabra.
Chavez wants to make women feel more comfortable using a ride-hailing service, and he believes he has created a system that can guarantee “no creepy men drivers because there are no men drivers at all.”
Of course, as it seems to happen with everything in Bojack Horseman, an idea that starts by sounding normal — a safe ride-hailing space for women — morphs and changes to the point that, eventually, Cabracadabra is staffed by a bunch of strippers. Strippers that happen to be orca whales, as a matter of fact.
The Tesla Network Advantage
As is often the case in Bojack Horseman, the idea behind Cabracadabra is rooted in the real world. Sexual assault on ride-hailing services is a real problem. Tesla has the potential to use its vertically integrated platform to address this in a way that would give the company a real advantage.
First, every Tesla Model 3 and Model Y has a cabin-facing camera. The footage from this camera can be controlled by Tesla itself, and would not be possible for the driver to delete. A passenger who felt they had an issue during their ride could ask Tesla to save and review the data from the passenger camera. Drivers would also inherently benefit from a security standpoint, as customers would know every vehicle is filming them. Drivers could also ask that Tesla save the data.
Secondly, in the clip above, Chavez raises the point of how it can be awkward to hear a ride-hailing driver slowly repeat your address, as if trying to memorize it. The integrated navigation system from Tesla can handle all of this. I assume that Uber and Lyft actually already perform similar functions here, but the large, central navigation system would be an upgrade over the phones the drivers of those platforms have tended to use.
Finally, Tesla has the ability to track each driver in a much more granular way. The cars track where they go and how fast they go. Tesla could build in rules that ensure their drivers are being safe.
The integrated hardware already available within the car, as well as the ability for Tesla to control its own software, gives Tesla significant advantages that no other ride-hailing service would be able to have.
The Tesla Network Disadvantage … Or Is It?
There is one problem with the launch of a Tesla Network, however — what about areas that don’t have many Tesla vehicles? Part of the reason that Uber and Lyft are so popular is they are practically ubiquitous. If you opened your Tesla Network app and found that there was a huge wait, it wouldn’t be appealing.
Yet, once again, Tesla’s vertical integration could go a long way toward solving this. Unlike Uber and Lyft, Tesla could create special offers to purchase or lease vehicles for potential drivers. Uber takes a 25% cut of each fare, while Lyft takes a 20% cut. In areas where Tesla was concerned about having enough drivers, it could easily make special deals for new drivers to give them a larger cut. This cut could be factored in for a period of time for those who adopt earlier — use your already existing Tesla vehicle, or purchase a new one by a certain date in certain areas of high need, and you can drive on the Tesla Network and earn 95% of the fare for the first two years!
Need to encourage additional driving? Drivers could earn software upgrades for their vehicles by taking enough fares in a period of time. Maybe if you drive 15 fares a month, you’d get to use the FSD package for the following month for free. Maybe if you drive 500 fares in a year, you unlock a speed boost in your Model 3. The possibilities for doing this, and tailoring them to match the areas of the highest need, are nearly endless.
Even if the Tesla Network is set up to just break even, it would give Tesla a whole slew of advantages that no other ride-hailing service could take advantage of. Tesla Network passengers would get acquainted with the technology and look of Tesla vehicles, driving further demand. Drivers would consider purchasing Tesla vehicles so they could take part in the network. And, additional mileage driven gives Tesla additional training for its Full Self Driving neural network. Even if the program itself doesn’t generate a profit, the Tesla Network could be another potential flywheel for generating additional profits for Tesla.
As a vertically integrated company, Tesla can uniquely address its disadvantages and use those challenges to drive demand and further profits.
I hadn’t considered the potential for the Tesla Network until I heard Keeney and thought about Chavez explaining the benefits of Cabracadabra, and then realized that Tesla has an incredible number of advantages that it could capitalize on if it chose to get into the ride-hailing business, advantages that incumbent ride-sharing apps couldn’t address in the same way. I’ve recently switched from not caring if it happens to hoping that it does.
I don’t want to suggest how much revenue the Tesla Network could add to Tesla’s bottom line, because that number could change drastically based on how Tesla opts to administer the program. If Tesla starts the program, though, no matter what, I foresee the Tesla Network bringing benefits to passengers, drivers, and Tesla that other ride-hailing services would find impossible to match.
I am a Tesla [NASDAQ:TSLA] shareholder who has purchased shares within the preceding 12 months. Research I do for articles, including this article, may compel me to increase or decrease stock positions. However, I will not do so within 48 hours after any article is published in which I discuss matters that I feel may materially affect stock price. I do not believe that my voice could or should influence stock price by itself, and I strongly caution anyone against using my work as your sole data point to choose to invest or divest in any company. My articles are my opinion, which was formulated using research based on publicly available data. However, my research or conclusions may be incorrect.