By Tesla (TSLA) CEO Elon Musk has long touted autonomous vehicles as the future of the company.
At his shareholder meeting in June, Musk said the technology alone would boost the company’s value by at least tenfold.
But with Musk set to unveil details on Oct. 10 about an autonomous taxi fleet he has teased for years, skeptics caution that robotaxis may be years away from becoming a profitable venture.
“It might be a little difficult to get crazy excited,” RBC Capital Markets analyst Tom Narayan said about the potential stock reaction for Tesla. “This is far into the future, so we just don’t know how big it’s going to impact [the business].”
Tesla’s entry into the market would put the company in direct competition with Google’s (GOOG, GOOGL) Waymo, which has been operating its self-driving taxi fleet in Los Angeles, San Francisco, and Phoenix, with an expansion scheduled in Austin.
While the timeline for any autonomous taxi from Tesla remains uncertain, analysts point to Waymo’s business model as proof of challenging economics.
Unlike Uber (Uber) and Lyft (LYFT), which utilize vehicles owned and operated by individual drivers, autonomous taxi firms must own their entire fleet. That means overseeing the cost of maintenance, car insurance, charging infrastructure, and cleaning.
It all amounts to an operational cost of $0.42 per mile per vehicle, according to a report by Lux Research. Chris Robinson, senior director of the energy team and author of the report, said that amounts to two to three times the cost of car ownership.
“You need to drive down the cost of offering those services to be competitive with car ownership,” Robinson said. “That’s why I don’t think we’ll see car ownership fundamentally displaced more so than services like Uber and taxi drivers that would be displaced by robotaxis.”
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