Tesla unveiled a plan for a self-driving robotaxi service that could upend the ride-hailing industry, undercutting Uber and Lyft’s costs with autonomous vehicles. In today’s FA Alpha Daily, we explore what could significantly impact Lyft’s profitability goals, which were already dependent on self-driving cars but hampered by needing partnerships with other companies.
FA Alpha Daily:
Thursday Uniform Accounting Analysis
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Elon Musk has been working on transforming transportation for a long time.
At a recent Tesla (TSLA) event, he provided a glimpse into how the company aims to disrupt ride-hailing through a network of self-driving robotaxis available via an app.
Users would be able to summon vehicles with the touch of a button, track their locations, and control vehicle settings like music from their phones.
It’s an ambitious concept to be sure, but if anyone has shown the ability to turn ideas into reality, it’s Musk and Tesla.
The company has already made electric vehicles mainstream and is pushing hard on autonomous driving technology. Tesla owners can even experience semi-autonomous “Autopilot” functionality today on highways.
Tesla’s robotaxi concept poses major risks for the business models of established players like Uber (UBER) and Lyft (LYFT).
Both have struggled to consistently deliver profits as they’ve battled intense competition for market share. Lyft in particular remains unprofitable after going public in 2019 despite coming close in the last few quarters.
The ride-hailing duopoly relies on human drivers who take a cut of each fare. However, Tesla aims to eliminate that cost through full self-driving capabilities.
Without a need to pay the drivers, Tesla’s robotaxi network could underprice competitors and capture a huge share of the growing ride-hailing market.
Lyft had banked on autonomous vehicles being a catalyst to finally reach sustained profitability but Tesla’s integrated approach of owning both software and vehicle fleets is a nightmare scenario.
Lyft will have to rely on partnerships with automakers and tech firms, sharing profits across multiple stakeholders.
Investors remain optimistic about Lyft crossing the chasm but Tesla’s robotaxi can change the market’s view.
If Tesla succeeds in deploying fleets of self-piloting taxis nationwide, it could slow Lyft’s progress towards profitability or even put the brakes on it altogether.
Best regards,
Joel Litman & Rob Spivey
Chief Investment Strategist &
Director of Research
at Valens Research
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