TSLA - The Paradox of Negative Cost of Ownership

I recently watched a video of Elon Musk describing his vision of car ownership and robotaxis. In short, when autonomous driving is fully realized and released, anyone can–on their own schedule–add/drop their Tesla car to/from the robotaxi fleet via an app and make money when they are not personally using their car.

Musk’s grand vision is that the cost of ownership is negative–meaning that owning a Tesla used in their fleet of robotaxis will provide a net income to the owner even after the monthly car payment.

At first, this sounds like an incredible innovation and a path to huge volumes. But how does it play out if cost of ownership is negative? Economic theory would suggest that demand is infinite if the cost of ownership is negative. But if that demand were ever filled, everyone would own a car and the need for robotaxis would be virtually zero! It’s an interesting paradox.

Of course, supply cannot keep up with an infinite demand, or anything close to it. Any rational company would increase prices to reduce the massive demand caused by a negative effective price–thus aligning demand to supply and removing the pricing paradox.

The vision is certainly fascinating and no doubt the relationship people have with cars will change dramatically in the future (it has already started, to be sure). Tying this back to TSLA, surely they will avoid a pricing paradox and the logical outcome is higher revenue once a robotaxi is rolled out.

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I don’t know - - - Musk’s grand vision assumes that every Tesla owner will be financially motivated and simply thrilled to participate by making their auto part of the robotaxi fleet.

I don’t own a Tesla and it’s unlikely that will ever buy one, but setting that aside I can assure you that if I did own a Tesla I would be very reluctant to include it as a member of the robotaxi fleet irrespective of the potential for a negative cost of ownership.

I’m kind of old and maybe old fashioned as well, but I am pretty sure that my sentiments would be in the majority. IMO the fleet of robotaxis will most likely be provided by fleet owners rather than individual, retail buyers.

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The cost of ownership of any profitable business has to be negative by definition. Robotaxis are no different than many other commodity businesses like food and apparel. How does Tesla make money on robotaxis? Not so much on the hardware but on the FSD AI that runs them.

Denny Schlesinger

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The things that happen in taxis and ubers…blech, no way. Once you get your tesla back with puke in it, who cleans that up?

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