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What Tesla's Robo-Taxi Network Means for Uber and Lyft

- By Jacob Maslow

Tesla Inc. (TSLA) held their Autonomy Investor Day on April 22, 2019. The presentation featured CEO Elon Musk and the company's advancement in full self-driving technology. Musk announced that the company's autonomous driving hardware and software is currently in production and will be available through over-the-air updates.

Autonomy Investor Day demonstrated features and functions that the company is working on as well as Musk's prediction that the company will receive regulatory approval for their tech by the end of 2020.

Tesla is working on a robotaxi service. The company plans on having over one million robotaxis in operation by 2020. Owners of Tesla vehicles will be able to add their vehicle to a Tesla rideshare app, an app that Musk claims to be a combination of Uber and Airbnb.

Musk told the audience that the company would have over one million robotaxis in their network "next year for sure." An over-the-air update will enable a fleet of vehicles that Musk claims can earn owners over $30,000 a year.

Uber and Lyft (LYFT) will be Tesla's robotaxi network's biggest competitors.

Investors that are afraid of how Tesla entering the market would impact stock prices will need to look at the bigger picture. The company has yet to reveal solid details and figures to back up their robotaxi predictions.

The company lacks a definite timeline for the robotaxi network to be available, although Musk has claimed that it will be available sometime next year.

In terms of vehicle availability, Uber has 3 million drivers worldwide and Lyft has 1.5 million drivers.

Tesla's network would have a major impact, especially on Lyft, who is trying to remain competitive with Uber. The robo network will be fully autonomous, so owners will not need to be behind the wheel and can make money passively.

Passengers who don't enjoy small talk or want to drive in a Tesla will be more inclined to use the service. Musk claims that the service will be cheaper than Uber and Lyft. Costs for the service are projected to be $0.18 a mile, far less than Uber and Lyft's pricing.

Should investors in Uber (when it goes public) and Lyft be concerned? Yes. Tesla is known for their delays and optimistic timelines, so it may be longer than expected before the taxi network goes live. There are also a lot of questions that have yet to be answered by Tesla. Liability in accidents will remain unclear as well as regulatory issues, which may not be cleared.

Disclosure: Author has no stake in the listed equities

This article first appeared on GuruFocus.