There have been lots of speculations about how Tesla Motors might enter the shared mobility space, but why does such a move make sense, particularly for an automaker? There are several reasons, and they’re generally related to the shift toward autonomous driving.
Tesla, Uber CEOs on The Late Show
Both Tesla Motors CEO Elon Musk and Uber CEO Travis Kalanick have already appeared with Stephen Colbert on The Late Show. Their appearances and several others suggest that the late night TV program will add a business-related component to the talk show. Indeed, The Late Show seems an unlikely place for a discussion about the future of driving, but Musk and Kalanick both talked about it with Colbert.
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Tesla bulls argue that the company is spearheading the transformation of the auto industry with designs on doing more than just selling electric vehicles. The automaker has certainly take a dive into a related area with its energy storage systems, but Morgan Stanley analyst Adam Jonas and his team are expecting a lot more. They have a $465 per share price target and today provided analysis of Uber’s appearance on The Late Show.
After Morgan Stanley analysts released their report on Tesla Motors, shares of the automaker climbed as much as 2.45% to $266.45 per share.
Tesla, Uber and driverless cars
One of the hottest topics on the auto industry right now is autonomous cars, something Tesla has been experimenting with and pushing out new autonomous driving features to the Model S with over-the-air software updates. Colbert broached the subject with Kalanick, who also sees driverless cars as the future. He talked about Apple working on a driverless electric vehicle as if it’s a sure thing, and the addition of several key automotive engineers to the company’s staff suggests that he’s right. However, all we have are rumors at this point.
Interestingly, Jonas thinks automakers like Tesla will compete directly with rather than partnering with ride-sharing companies like Uber in the area of autonomous cars. He called Kalanick’s response to Colbert’s question about autonomous driving technology “as simple and elegant” as he’s ever heard.
Tesla’s business model to evolve
Tesla has already found success in the areas of electric vehicle technology and software and has begun moving toward vertical integration with the construction of its gigafactory. Uber has found success in dealing with another problem, which is consumers’ need for transportation even when they can’t own a car (whether due to money or having no place to park it. The company is also helping consumers get past what Jonas says is the automobile’s biggest inefficiency, which he says is only about 4% utilization per day.
Tesla’s focus on electric vehicles, combined with Uber’s focus on shared mobility, both attack the same issue from different angles, and that is sustainable transportation. As Jonas notes, Tesla’s business model specifically mentions accelerating the global “transition to sustainable transport,” which indeed goes beyond just electric vehicles.
Tesla aims for sustainable transportation
Jonas believes Uber and Tesla are at the opposite ends of mobility, which he sees as a $10 trillion industry. However, he doesn’t think they will remain on opposite ends of it because he believes Tesla won’t be happy with just selling vehicles to consumers who leave them parked 96% of the time. As a result, he believes the EV manufacturer and other automakers will design and sell their own vehicles specifically aimed at shared mobility. He doesn’t give any ideas about what such vehicles might look like or what kinds of features they might have that would distinguish them from most vehicles.
And just as he believes automakers won’t be content to stay on one end of the mobility spectrum, he also doesn’t think ride-sharing firms will remain on their current side of it. In fact, he doesn’t even think it’s possible for ride-sharing companies in their current business models to “achieve sustainable barriers to entry with just network effects and little differentiation” in terms of software.
The Morgan Stanley team sees driverless vehicle technology as being at the center of the mobility spectrum and expects Uber and its competitors to keep expanding into autonomous car development and even start managing their own fleet of vehicles. He also thinks that companies which will be successful in the long term will be those that can strike the best balance of vehicles versus the overall platform to maximize mobility and make it as cost-efficient as possible for drivers and companies alike.
Of course Tesla isn’t the only automaker experimenting with autonomous driving technology. BMW board member Peter Schwarzenbauer said at the Frankfurt Auto Show last week that autonomous vehicles will bring about new concepts in mobility. He also said the German automaker is rethinking its vehicles.
Interestingly, Schwarzenbauer also made some comments similar to what Jonas said in terms of automakers moving beyond just cars. He thinks luxury automakers will get a leg up on the competition if they can “offer a portfolio transport options far beyond just selling a car.”
Tesla aims to accelerate sustainable transport
Jonas is positive that Tesla will not only launch a shared mobility vehicle to fill an opportunity in the market but also a shared mobility service because of its goal to accelerate the adoption of sustainable transport. After all, only a certain number of vehicles can fit on a nation’s roads at a particular time, and the more the population continues to grow, the more important shared mobility becomes for transportation to become sustainable.
Further, the analyst thinks other automakers will also add ride-sharing services, noting that each year, people travel 10 trillion miles. He believes one company will be the first to reach a 1% share of this massive market, and he is confident that Tesla will be that company. This is why he raised his price target for Tesla to $465 per share just last month.