Tesla robotaxi finance model by AJ

A previous post on Tesla Robotaxi finance showed the robotaxi market was worth trillions, and AJ on Twitter/X provided this Tesla robotaxi finance model in March 2024. He supports a high valuation of Tesla. In his analysis, AJ looks at single-vehicle economics and covers the bottom-up calculation of cost per mile (CPM) and has it at $0.56. His model then works out gross profit per vehicle. Follow AJ on Twitter for more up to date information.

I believe there is a significant cost savings potential for Tesla and provide a good view of the early stage robotaxi economic model.

AJ from Twitter

The single car leads to the economics of a ramping fleet in the US and implied P&L impact on Tesla financials.

Other Tesla Robotaxi Models

A comparison of this Robotaxi model is provided on this post Tesla Makes Robotaxis economic based on ideas from Dave Lee and James Douma from a YouTube or Cern Basher on Twitter also has a very good model (Twitter/X Here), and Ark Invest layout summaries in the Big Ideas 2024.

Summary of Tesla Robotaxi Finance Model

Tesla Robotaxi econcomics v2 by AJ on Twitter
Source. AJ on Twitter. https://x.com/alojoh/status/1769457864836288966?s=20

Key Considerations in Model

  • Cost per mile (CPM) is the most important metric!
  • Idle miles is the second most important consideration. “Idle miles” (IMs). Travelling from one customer to another is a cost. In normal taxis or Uber rides, drivers cost is significant.
  • This preliminary analysis suggests a CPM of around 58 cents (current M3/MY platform) and potential revenue of 83 cents per mile at 30% profit margin.
  • The assumed vehicle cost (slightly lower than current) takes into account the fact that RTs are not about to launch and thus Tesla is likely to lower average production cost further (absent a spike in raw materials prices). Tesla demonstrates about 3% reduction of cost of goods sold (COGS) most quarters.

B Vehicle Economics

tesla robotaxis financial economics'
Source. AJ on Twitter. https://x.com/alojoh/status/1769457864836288966?s=20

Lifetime Miles Changes CPM

As AJ points out the lifetime of the vehicle reduced cost from 58c to 30c with longer life, and 0.07 electricity, based on solar costs for their Semi trucking environment.

Scenario250,000mile500,000 miles1 million miles
At $34,000 Car Cost
At $25,000 Car Cost
CPM with 17ckWh0.510.410.36
CPM with 7ckWh0.450.350.30

Assumptions by AJ

  1. Electricity: $.17/kWh; combined consumption 25 kWh/100mi EPA times ‘real-world’-factor 1.25x (includes ‘real world’ driving and charging loss).
  2. Cleaning: includes interior and exterior cleaning. Assumes 30mins combined @$40/h + $4 in consumables. Cleaning every 35 rides, for optimal side camera performance, times average Uber ride length (5.5mi) and average ‘idle’-miles 50%.
  3. Insurance equivalent: not insurance in the traditional sense. Assumes Tesla to cover all accident-related cost. Assumed at 50% of ‘good’ drivers insurance premium, less insurer’s profit margin.
  4. Vehicle interior refurbishment: eg renewal of upholstering, significant wear/tear from more adjustments, and ‘mishaps’. Takes into account idle miles.
  5. Wipers: assumes 2x greater usage vs human driver (for optimal front camera performance at all times).
  6. Breaks: assumes 1.2x greater usage vs conservative human driver.
  7. Air filter/airconditioning are deactivated during “idle” miles.
  8. Idle miles: reflect miles driven without paying customer (eg. to get from one customer to the next or return to charging/service station).

Challenges to Model

Other contributors challenged many of the model assumptions. (e.g. TSLATalk )

  • 250k mile life is too low. With regular maintenance, the life of the vehicle should be 600-800k miles.
  • Tesla is manufacturing a million mile compact car, at a $17k COGS. This reduces costs down to ~6¢ per mile.
  • Empty miles could be as low as 25-30% etc.

Ark Invest point out the cost of a robotaxi will be less than 25 cents per mile by 2030, cheaper than a horse in 1870’s or cars from 1934 to 2020.

Ark invest tesla robotaxi cost of transport as a service

Comparison with CleanTechnica in 2020

CleanTechnica created a model in 2020 that Tesla expects to undercut existing ridesharing services, which is currently about $3 per mile.

  • Consumer price of ~$1.00 per mile
  • Operate on a $0.18 per mile cost basis
  • Drive 90,000 miles per car per year
  • Generate ~$30,000 gross profit per car per year.

While AJ’s model shows a 58c CPM, a $25000 cost, 1 million miles shows cost would be about 30 cents, double the indicated cost.

Robotaxi Fleet and Tesla Financials

With 600,000 taxis and 1 million ride-share drivers in USA, a quick model below demonstrates fleet revenue for 2m robotaxis at $90 billion additional profit. At a PE of 20, the valuation increase would be $1.8 trillion

Fleet NumbersRevenue ($ Billion)
1 million$45b
2 million$90b
10 million$450b
Scenario by Change Discussion