Tesla’s autonomous taxi service, which could receive a big unveiling next Monday, could help pay back the cost of an electric car in just five years. Analysis suggests that the Model 3, the company’s cheapest vehicle that starts at $35,000, could earn thousands of dollars for its owner by joining the upcoming fleet of self-driving vehicles.
“[ARK Invest]’s research suggests that the Model 3 will generate cash flow of $10,000 per year at a minimum on an autonomous taxi platform,” Cathie Wood, founder and CEO of the firm, wrote in a Twitter post shared by Musk on Tuesday. “[Tasha Keeney] and [Sam Korus] have done the research. We are happy to share it!”
It’s perhaps one of the biggest benefits of Tesla’s self-driving capabilities. The company announced in October 2016 that every car would start shipping with the necessary cameras, ultrasonic sensors and other tools to enable point-to-point autonomous driving. CEO Elon Musk claimed in February that this feature would probably be safe enough for launch by the end of 2020, although regulations are another issue. The company is planning an investor day to detail these plans on April 22.
ARK previously shared analysis in October 2016 that showed during the first year of ownership, an owner that shared their car for one and a half hours per day would see a positive cash flow of $10,000. This factors in a $7,000 down payment on the car, and assumes a taxi rate of $2.50 per mile — the stated cost of an UberX in San Francisco at the time of the report’s publication. The analysis firm goes as far as to state that “anyone with the credit to lease the vehicle could more than pay for it in the first year and generate revenue for the duration of its lease.”
The research breaks down the costs involved in this first year:
- The revenue earned from sending a car to drive for $2.50 per mile for one and a half hours each day would equate to $29,018 per year.
- The lease would cost $1,480.
- Insurance would come to $1,000.
- Charging would cost $672. Note that Tesla supercharger prices have risen since this report, increasing 33 percent in January to $0.34 per kilowatt-hour at one California station. The long-range Tesla Model 3 has a 74-kilowatt-hour battery to travel 310 miles per charge, meaning it would cost just over $25 to fully charge from zero.
- Maintenance would cost $1,185.
- Tires cost $498.
- Other operating costs would amount to $300.
- Cleaning would come to $832.
- Parking would cost $774.
- Depreciation would come to $4,612. Note that Musk claimed over the weekend that a self-driving Tesla would be an appreciating, rather than a depreciating, asset. Musk went as far as to claim that an autonomous car would be five to 10 times more valuable than a regular car.
- Ongoing cash flow, the revenue minus the costs listed above, would come to $17,655.
- Taking a down payment of $7,000 off the $17,665 ongoing cash flow leaves $10,655 first year cash flow.
This analysis received criticism, such as from General Motors software developer Daniel Forhan:
The analysis is dependent on a high price per mile, a situation the report admits would only last as long as the market was undersupplied. That’s perhaps a situation that wouldn’t last long, as Tesla has already stipulated with its Model 3 leasing program that customers won’t be able to buy the car at the end as the vehicles will be used to fill the gaps in the robo-taxi service.
The price per mile will change how many hours per day a user would need to rent out their car to earn the price of the vehicle back within five years. While $1.45 would be enough to rent it out for less than two hours per day, around the $0.60 mark drivers would have to commit to around four hours. A $0.40 price would require six hours per day, and the figure approaches 12 hours the closer prices get to $0.25 per day. Tesla estimated in 2016 that owners only use their car for around 10 percent of the day, which would offer around 21 hours per day of potential rental time.
The report estimates the equilibrium price of autonomous taxis will be around $0.35 per mile. The firm claims this would be cheaper than walking, assuming a walker spends $3.99 on a McDonald’s Big Mac to gain the required calories. Of course, that comparison ignores a myriad of factors like the health benefits of exercise.
It’s not the first positive analysis of Tesla’s plan. Loup Ventures explained in March 2018 that the service could provide owners with $6,892 per year after a 10 percent payment to Tesla. That equates to $574 per month, more than the average lease payment of $350 to $500 per month on a car in the United States. The analysis estimated that Tesla could capture four to 10 percent of the ridesharing market by 2023.
While Musk claims that Tesla is “vastly ahead of everyone” in developing full self-driving, the fact remains that the feature is still under development. It’s hard to say for sure how this feature will pan out in practice, but preliminary analysis suggests it could prove a big generator of value for Tesla owners.