Tesla (TSLA - Get Report) CEO Elon Musk demonstrated the first tunnel constructed by his Boring Co. Tuesday evening.

The system abandoned an earlier idea for using "sleds" to transport cars and pedestrians. Instead the demonstration Tuesday used a modified Tesla X with guide wheels to keep it from hitting the tunnel's walls. Musk said the cars could reach speeds of 150 mph, though for demonstration purposes they were limited to 40 to 50 mph because the ride is still a little rough.

Construction on the tunnel began about two years ago near the Hawthorne, Calif. headquarters of Musk's SpaceX rocket company.

Musk envisions building tunnels in busy urban areas to relive traffic congestion.

The company is in preliminary stages of a project to connect Chicago O'Hare airport and downtown Chicago.

The project is separate from Musk's proposal for high-speed hyperloops, effectively long-distance vacuum tubes Musk says could connect San Francisco and Los Angeles for a fraction of the cost of California's long-delayed high-speed rail project.