Robotaxi Dreams Hitting Wall of Reluctance and Delays
Despite the hype around robotaxis, driven in large part by Tesla CEO Elon Musk, driverless taxis won’t achieve forecasts of widespread use by 2030.
Elon Musk’s vision and forecast for the global robotaxi market is as bright as his outlook for the Cybertruck, a pneumatically powered hyperloop connecting Los Angeles and San Francisco and colonizing Mars. That’s to say iconoclast Musk is probably way off-base on robotaxis. But remember, this is also the visionary who has by far the most valuable auto company in the world and is its wealthiest person.
The question confronting companies and suppliers in the robotaxi game is whether driverless taxis will be a mainstay of city mobility and transportation or remain a stifled niche like natural-gas- or hydrogen-powered passenger cars. Either way, it seems clear that heady forecasts around an explosion in robotaxis are fanciful.
“I would encourage anyone to understand the (robotaxis and Tesla’s overall autonomous driving system) better to simply try it out, let the car drive you around,” Musk said on an investor call in July after reporting disappointing second-quarter financial results. “Once people use it, they tend to continue using it. So, it's vastly compelling.”
WIlliam Stein, an analyst with Truist Securities, took Musk up on his pitch, and reported that he narrowly avoided an accident and had to intervene several times to correct Tesla’s system, which is being deployed in a robotaxi prototype expected to be unveiled later this month.
The various forecasts of robotaxi growth seem to belie reality. Prevailing forecasts indicate the market could grow from an estimated $400 million in 2023 to about $ 45.7 billion by 2030, with a compound annual growth rate (CAGR) of around 91.8%, according to Global Market Insights.
Analysts say several factors are driving anticipated rapid growth. These include advancements in autonomous driving tech, growing urban populations and traffic congestion, and environmental regulations promoting sustainable transportation solutions.
Regionally, North America and Asia-Pacific are seen as significant potential markets for robotaxis. North America, particularly the U.S., has a strong R&D infrastructure and companies like Tesla, Waymo and Cruise pushing the business model. Asia-Pacific, especially China and Japan, is also a key player, with government initiatives and significant investments boosting the development and deployment of autonomous robotaxis.
However, the market and hopes for billions in future profits face huge challenges, including navigating regulatory landscapes, ensuring technological reliability under diverse road and environmental conditions, and addressing mounting public safety concerns that are reflected in doubts by legislators. These are time-consuming headwinds.
Several automakers beyond Tesla are actively investing in the robotaxi market. Here’s a roundup:
Waymo, the subsidiary of Alphabet Inc., is a pioneer in autonomous-vehicle technology and operates the Waymo One robotaxi service in Phoenix. It has expanded to other locations, using Chrysler Pacifica minivans and Jaguar I-PACE electric SUVs.
General Motors' self-driving-car subsidiary Cruise has been beset by technical and managerial setbacks but resumed supervised autonomous services recently in Phoenix after being forced to halt all services and recall its vehicles after an October incident in San Francisco where a vehicle hit a pedestrian.
Nissan Motor Corporation: Nissan has been investing in autonomous-vehicle technology as part of its Nissan Intelligent Mobility initiative. The company has tested its self-driving cars in various cities and aims to deploy SAE Level 4 system robotaxis in Japan by 2027.
Volkswagen AG: This year, VW is offering robotaxi test drives to customers in Hamburg, Germany. The drives will feature the ID. Buzz and will be offered via VW Group’s mobility subsidiary MOIA. In an initial phase, the autonomous vehicles will have a “safety driver” who can intervene when necessary.
Daimler AG (Mercedes-Benz): Daimler is working on autonomous-driving technology through its partnership with Bosch. The company has conducted pilot projects for robotaxis in cities including San Jose, CA.
Baidu, Inc.: Baidu, often referred to as the "Google of China," is heavily invested in autonomous driving through its Apollo project. Baidu has launched its robotaxi service, Apollo Go, in multiple Chinese cities.
Lyft, Inc.: Lyft has partnered with several companies, including Waymo and Aptiv, to integrate autonomous vehicles into its ride-hailing platform. Lyft has been conducting trials and plans to expand its autonomous ride-hailing services.
Amazon is developing robotaxis that could be deployed for delivering packages as well as a taxi service for Prime members.
Truist Securities’ Stein is not 100% bearish on self-driving vehicles. “What really impressed us was how well the (Tesla) car adapted to challenging disruptions like lane closures, heavy potholes and traffic flows that would confuse even experienced human drivers,” he says in a note. “The newer (Full Self-Driving) version was more active in switching lanes, and we figured out how to set the top speed above 55 (mph [89 km/h])(a challenge we highlighted in our last report).”
But several factors are contributing to the hesitation and delays in more cities approving the deployment of robotaxis:
Regulatory and Legal Challenges: The regulatory landscape for autonomous vehicles is complex and varies significantly regionally. Cities must develop and implement comprehensive frameworks that address safety standards, data privacy, accident liability and the certification of autonomous systems. This process involves collaboration between legislators, industry leaders and advocacy groups, which have proved to be time-consuming.
Safety Concerns: Ensuring the safety and reliability of autonomous vehicles in diverse urban environments remains a significant technological challenge. Autonomous driving technology must be able to handle various scenarios such as bad weather, erratic human behavior and complex traffic conditions. Incidents involving autonomous vehicles, such as accidents or unexpected system failures, have led to regulatory skepticism.
Public Trust and Acceptance: Building public trust in the safety and reliability of robotaxis is essential. Many people are still anxious about riding in vehicles without a human driver.
Technological Hurdles: There are still technological barriers to achieving full autonomy. These include improving real-time data processing and sensor performance. Ensuring that autonomous vehicles can operate safely in various conditions is a major challenge.
Economic and Operational Challenges: Deploying and maintaining a fleet of robotaxis involves significant financial investment. Companies need to ensure that the economic model for robotaxis is viable before committing to production.
Infrastructure and Urban Planning: Cities need to adapt their “smart city” infrastructure to accommodate autonomous vehicles, which can include modifications to roads, traffic signals and parking areas. This requires significant investment by various governmental and private-sector stakeholders.
While the exuberance over whiz-bang tech by some of the public and potential profits by OEMs and suppliers are significant, an array of regulatory, safety, technological, economic and infrastructural challenges point to a much more distant ramp-up to tens of billions in profits than 2030.
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