Tesla’s “Robotaxi Day”: What to expect

Overview

Tesla’s "We, Robot" event will be happening on Thursday, October 10, 2024, with remarks beginning at 7 pm Pacific Standard Time (Friday, 10am Singapore Time). Its self-driving robotaxi will be unveiled, along with announcements of any step-up towards full autonomous driving capabilities from its current Full-Self Driving (FSD) technology. Currently, the robotaxi is rumoured to be named ‘Cybercab’, which may be a two-door, two-seater vehicle prototype, with no steering wheel or pedals.

Robotaxi has generated much hype over the past years, given the massive price advantage that it brings over their petrol equivalents – lower operating cost of electric vehicles (EVs), manpower savings (driverless). This may generate significant cost-savings for consumers, but of course, safety and reliability are concerns to weigh.

Key areas of focus

Timeline of roll-out: While the Cybercab is not expected to be deployed immediately, the timeline of its commercial roll-out will be the central focus. Thus far, predictions have ranged from as early as late 2024, all the way to 2027 (or even 2030!), so a clear guidance will help to put those speculations to rest.

An accelerated roll-out could bode well for Tesla’s share price, as the company can diversify its businesses into autonomous ride-hailing quickly as an additional stream of revenue. A quicker roll-out will also anchor its position as the market leader in the autonomous vehicle space by giving competitors little runway to catch up, while at the same time, allow a larger scale of driving data collection to improve its Full Self-Driving (FSD) software.

We believe a late-2026 roll-out timeline may still be tolerable, given that it has previously taken Cybertruck approximately four years from its unveiling in 2019 to its initial delivery by the end of 2023.

Costs of production involved: Market participants may also be interested in the costs involved to roll out the Robotaxi in large scale, with investments likely needed in production lines, development expenses, manpower shift or regulatory costs. Tesla has laid off more than 10% of its global workforce in April this year, so the introduction of a new product will cast doubts over its production plans.

Tesla’s profit margins have faced some pressures lately. In 2Q 2024, its adjusted operating margin has shrank for the fourth straight quarter to its lowest in three years (14.4% versus 18.7% a year ago), so any further impact on the margins will remain on watch.

Additional: More clarity on its business models eg. new app, platforms will also be sought, with Elon Musk previously bringing up the possibility of letting Tesla owners run their cars as robotaxis when they are not in use. The company has also previously guided for low-cost EV models, alongside the production of its in-house battery to power its products, so any information on those may be welcomed as well.

Stocks to watch

Tesla: Year-to-date, Tesla’s share price is still down 3.0%, so the event may determine if investors’ confidence can receive a boost to drive some catch-up to its Magnificent Seven peers. The risks of disappointment may come in any delays in rolling out the Robotaxi fleet, or if progress in achieving full autonomous driving capabilities failed to impress.

Technically, a near-term ascending channel is in place, with share price now seeking to form a higher low at the lower trendline support at the US$239.54 level. Its daily relative strength index (RSI) is also back at its mid-line, which may call for some defending. Trading in line with the channel may see share price move to retest a key resistance at the US$266.12 level, which prices failed to break in December 2023 and July 2024. Any breakdown of the channel may see a support confluence at the US$212.77 level.

Uber, Lyft: Uber has dominated the global market for ride-hailing (25% share in 2022), with Lyft in second place (8% share in 2022). Thus far, their business models have relied on a network of human drivers to provide services. While a quicker roll-out in fully autonomous robotaxis may be looked upon as a potential threat, these companies may adapt and work with Tesla to incorporate the fleet into their ecosystem, tapping on their existing reputation around reliability and strong user base. Therefore, any sell-off in share price may potentially be an overreaction.

Uber’s share price has been trading within a near-term rising wedge, with the broader upward trend largely intact. Its daily RSI has managed to bounce off its mid-line, which suggests buyers in control. Any sell-off may leave the US$74.82 level as a near-term wedge trendline support to hold, while a push to a new higher high in line with the upward trend may be likely, with the US$81.52 level on watch as resistance (2024 highs).

Automotive stocks eg. Ford, GM: With robotaxi likely to translate to significant cost-savings for consumers, traditional car manufacturers will be put under the crosshair if consumers are more receptive in full autonomous driving. While it could still be a long time before robotaxi become a commercially viable option, the need to adapt will be key. For now, a successful Tesla’s event may potentially see a knee-jerk downside reaction for these stocks.

Alphabet: Its Waymo unit has been a frontrunner in the robotaxi space so far, and a successful product introduction from Tesla at the upcoming event will no doubt serve as a potential threat. However, Waymo still accounts for a meagre share of Alphabet’s business and any overreaction to Tesla’s threat will likely adjust quickly.

Nvidia: Advancements in Tesla’s FSD may be beneficial for Nvidia, given that the technology is powered by Nvidia's chips. With the continued push towards autonomous driving, which will be displayed at the upcoming Tesla’s event, greater adoption of some form autonomous capabilities in automotives may continue to support demand for Nvidia’s chips.