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.