Elon Musk gets into a self-driving Tesla, but investors get out

On Thursday Elon Musk unveiled his vision for robotaxis and self-driving cars. Investors reacted disappointed on Friday and Tesla stock fell by as much as 9%. Whatever else you may think of him; Musk’s long-term vision for urban mobility is becoming increasingly relevant. Due to urbanization, declining car ownership and working from home, a future of shared transport, preferably on demand, is getting closer and closer.

Singapore ruthlessly car-free

Last week I was in Singapore to attend Tech Week. Singapore is one of the world’s most futuristic cities, where Electronic Road Pricing has been working fine for years and just the license to buy a car, the Certificate of Entitlement (a very well chosen name), costs at least $80,000.

Singapore understands that a city-state of six million inhabitants simply does not offer space for a lot of car traffic and acts accordingly. Only 14% of the population owns a car.

Due to various taxes and excise duties, the price of a small Toyota easily rises above $200,000. There are no old cars, because the permit is only valid for ten years. It’s absolute hell for a car enthusiast. Public transport in Singapore, on the other hand, is fantastic: dirt cheap, squeaky clean and extremely safe, with air conditioning on bus and subway, which runs every three (!) minutes during rush hour.

Due to the understandable lament of a Singaporean taxi driver, who sometimes pays up to a hundred dollars a day for the rental of his taxi on gross income of one hundred and fifty dollars, I was extra fascinated by the future vision that Musk outlined Thursday during the Tesla event “We, Robot” at Warner Brothers studios in Los Angeles. The Verge made a six- minute summary.

Cybercab and Robovan

The highlight was the unveiling of the Tesla Cybercab, a fully autonomous robotaxi without a steering wheel or pedals, because there is no driver: everyone is a passenger. The Cybercab is positioned as an affordable solution under $25,000, but even the most die-hard Tesla fanboy doesn’t believe that price is going to work. It will surely come out at a higher price.

In addition to the Cybercab, Musk also presented plans for autonomous versions of the Tesla Model 3 and Model Y, with the hope that these vehicles will be on the market in 2026. (Musk himself said ‘expectation’, but my ears immediately translate that from Elon Musks to ‘hope’.) Surprising was the introduction of the Tesla Robovan (pronounced, according to Musk: Robooofen), a small bus in the shape of a hefty iron, which can accommodate twenty people.

Cars 6% in use

In Musk’s ideal vision, buyers would ‘rent out’ their Tesla Cybercab or Robovan to the community when as they are not using it themselves. Because people use their car less than 6% per week on average, a self driving car could recoup its investment the remaining 94% of the time.

That may still sound strange now, but who remembers the time when taxi drivers used to cheerfully argue that people would never drive a taxi themselves in their Prius and that even if that were to happen, nobody would ever get into a car with an amateur driver? But just like it did with Uber, the skepticism against a new form of transport will disappear very quickly as soon as the Cybercab arrives quickly when ordered, the journeys are safe and the price is comparable or lower than that of an Uber.

Disappointment among investors

Despite Musk’s ambitious presentation, investors were not enthusiastic. Analysts were generally disappointed by the lack of concrete details about the planning, expected costs and potential revenue for Tesla.

This reluctance among investors reflects a broader problem facing companies like Tesla. Investors often base their expectations on quarterly results, while Musk has a long-term vision, possibly thirty years ahead, to change the world with innovative technologies. One of his many other ventures, SpaceX, is another example of that approach.

Musk runs Tesla like a startup

However, what many investors don’t seem to understand is that Musk runs his companies like startups. This means that he focuses on long-term growth and value maximization and often opts for tactical improvisation in the short term.

This is normal for startups that have not yet found a complete product- market fit, with apologies for the jargon. Musk’s approach differs fundamentally from the traditional approaches of listed companies, where predictable quarterly figures determine the company’s share price.

For many investors, this approach is difficult to accept, especially when faced with short-term losses or delays in product launches. Musk’s long- term vision — which is focused on a world where shared autonomous vehicles dominate urban transport — can ultimately bring about a radical transformation of the mobility sector.

Investors in Tesla shouldn’t complain, because everyone knows by now that buying shares in an Elon Musk company is more like riding a roller coaster than riding a softly humming Tesla.

2050: global urbanization

Musk’s vision for robotaxis must be seen within the broader context of urbanization, a trend that will only increase in the coming decades. By 2050, it is estimated that nearly 90% of the population in the US, over 80% in Europe and almost two-thirds of the population in Asia will live in urban areas.

This urbanization is driven by the growth of megacities, where the demand for efficient, shared mobility solutions such as robotaxis and self-driving vehicles will increase rapidly. The current model of private car ownership is becoming increasingly unsustainable and unrealistic as cities become more densely populated. This is where Musk’s vision for robotaxis and shared mobility can play an important role.

From parking lot to park

The introduction of autonomous vehicles allows cities not only to reduce traffic congestion but also to create new opportunities for efficiently using urban spaces.

A remarkable aspect of Musk’s presentation was his vision for repurposing urban spaces. He suggested that parking lots in cities could be converted into recreational areas because robotaxis don’t need long-term parking; they are constantly on the move. Instead, these vehicles could be summoned via apps, similar to services like Uber, Lyft, and Grab, but without human drivers.

Declining car ownership in major cities

Car ownership in major cities continues to decline, partly due to high costs and the availability of public transportation. In cities like Amsterdam, only 22% of households own a car, while in Paris, the figure is 27%.

Even in cities like New York and London, where car ownership is higher (around 53% and 56%), private vehicles are becoming less necessary due to the presence of good public transport and alternative mobility options like ride-sharing. In cities like Los Angeles, where car ownership remains around 94%, awareness of the disadvantages of private car ownership is also beginning to rise, especially due to traffic congestion and the high cost of parking.

Unlike cities such as Singapore, Seoul, and Tokyo, American cities lack robust public transport systems. As a result, shared car ownership, or on-demand transportation like Musk suggests, could catch on even faster.

Unexpected Impact of Remote Work

Another important aspect contributing to changes in urban mobility is the rise of remote work. Since the pandemic, remote work has increased fivefold and is now a permanent part of daily life for millions of employees worldwide.

This has not only reduced commuting (and thus traffic congestion), but also affected the labor market, especially for groups that previously struggled to find work, such as women and people with disabilities.

The number of disabled employees in the U.S. has increased by two million since the pandemic, largely due to the ability to work remotely. Additionally, the percentage of working women in the U.S. has risen faster than that of men, partly due to the greater flexibility remote work offers in balancing work and caregiving responsibilities. These numbers highlight the fact that women manage both work and child-rearing, leading one to wonder what men are doing.

Remote Work and Birth Rates

A surprising consequence of remote work is its potential impact on birth rates. In East Asian countries, where long working hours and intense parenting pressures have led to declining birth rates, remote work seems to offer parents more flexibility in combining work and child-rearing.

This could lead to a slight increase in birth rates, with preliminary analyses suggesting that couples who work from home at least one day a week may want 0.3 to 0.5 more children. In countries like Singapore, with an aging population and low birth rates, having more children per family is encouraged by the government.

Shared Mobility is the Future

Given increasing urbanization, the rise of remote work, and the rising costs of car ownership, shared mobility is becoming increasingly logical. In cities where car ownership is declining and the use of space is changing, a model of shared cars or on-demand vehicles offers a sustainable alternative to traditional car ownership.

Of the ten words Elon Musk utters today, or bombards us with on X, eleven should be taken with a grain of salt. But Musk’s vision of robotaxis aligns seamlessly with global developments that will only be encouraged by governments.

The success of Airbnb shows that plenty of people are comfortable renting out their possessions for the right price. There’s no reason to believe this would be different for cars — whether self-driving or not.

It’s likely that Musk, with his self-driving cars, plays the role of a pioneer, who will eventually be overtaken by other players in the mass market. This is what is already happening with Tesla in the electric vehicle market, where it now faces strong competition from Chinese manufacturers and traditional carmakers. Waymo and Cruise are just the first competitors in the self-driving vehicle market. Perhaps this is a reason for Tesla investors to worry, but for everyone else, it’s good news.