How Tesla Could Compete With Uber and Lyft
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Wednesday, Oct. 25 was a memorable day in the stock market. With the S&P 500 falling 3.1% and the Nasdaq tumbling almost 4.5%, some may have assumed Tesla (TSLA) - Get Report struggled as well.
It's been quite the opposite, though, with shares soaring all week, up 17%. The move was capped off by Tesla's earnings results, where the company posted record profit and free-cash flow.
The bulls are obviously cheering the results. Bears are arguing that this quarter is, at best, a good one that's only delaying the inevitable and at worst is littered in fraud. The top takeaways from the report can be found here, but an interesting tidbit about the future popped up on the conference call.
From CEO Elon Musk:
"We absolutely see the future as kind of - as sort of a shared electric autonomy. So that you'll be able to do ride-hailing or share your car anyway, sort of a long-term model that's some combination of like Uber, Lyft and Airbnb."
It's a combination of those models, Musk said, adding, "The advantage that Tesla will have is that we will have millions of cars in the field with full-autonomy capability, and no one else will have that. So I think that ... will end up putting us in the strongest competitive position long-term."
In other words, any Tesla owner will be able to share his or her vehicle just like they can share their house or apartment on Airbnb. Tesla also plans to have its own fleet of ride-hailing vehicles. In other words, once its fully autonomous cars become a reality, customers will be able to "hail a Tesla" much like they hail an Uber or a Lyft.
For the record, this would thrust Tesla into competition with Alphabet's (GOOGL) - Get Report Waymo, Daimler (DDAIF) and Bosch's mobility-as-a-service platform (the former of which is the parent company to Mercedes and recently selected Nvidia (NVDA) - Get Report to power its robo-taxi service), and General Motors' (GM) - Get Report Cruise unit.
Later in the call, Musk clarified the company's long-term ride-hailing plans, saying that while Tesla will operate a fleet of vehicles, owners will be able to add or subtract their vehicle from the fleet at will.
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It's an interesting concept, particularly given the potential of autonomous vehicles. One has to wonder about the competitiveness in the ride-hailing industry as well. Say we have the following: Uber, Lyft, Tesla, Waymo, Daimler, Cruise and Ford (F) - Get Report , the last of which is working on its own solution.
That's seven companies and doesn't include the many startups coming to market as well. Where will that leave us in the future? One fear from an investment standpoint is revenue and margins. For consumers, lower prices are great, obviously. But if Lyft is undercut by Uber and Uber is undercut by Waymo, for example, can Waymo turn a profit? At least one that makes it a difference to such a large company?
The obvious hope is that it can. If it can't, and that goes for all the companies listed above, it could leave investors quite disappointed down the road. What that means for Tesla isn't clear just yet, as the focus right now is on production, China and profitability. But its ride-hailing ambitions will be worth watching in the future.
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This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.