Tesla launched its long-awaited robotaxi in Austin just last week, which entered a newly growing autonomous ride hailing industry. The robotaxi service uses Tesla’s Model Y vehicles equipped with Full Self Driving software, which is now a competitor to industry leader Alphabet-backed Waymo and others like Zoox.
What is a Robotaxi?
A robotaxi is a driverless car that operates as a taxi or ride-haling service, with companies like Alphabet’s subsidiary, Waymo and Amazon’s Zoox are already dominating the market.
Tesla’s new robotaxi uses Model Y SUVs, which are powered by an advanced version of Full Self Driving software. These cars have eight cameras which act as sensors. ⁽¹⁾
Tesla plans to introduce 2 purpose-built robotaxis, the Cybercab (sedan) and Robovan (multi-seater), both without steering wheels or pedals, which are expected to launch by 2026. ⁽²⁾
How Does Tesla’s Robotaxi Service Work?
Tesla opened up its robotaxi service to a limited number of customers in Austin, US where the company has its headquarters. The service is available within a geofenced area of Austin, where the company has been testing its vehicles. According to rider rules posted on Tesla’s website, all passengers must be over 18 years old, and the number of passengers may not exceed two.
Like Waymo and Zoox, Tesla will remotely monitor the performance of the vehicles and help them to navigate through difficult situations. Tesla has said the vehicles will be equipped with microphones to support their response to sirens from emergency vehicles. ⁽³⁾
Tesla is charging its initial riders only $4.20 per trip, which would barely cover the cost of the Tesla employee riding as a “safety monitor” in the passenger seat of the vehicles involved if that employee is making the Texas minimum wage of $7.25 an hour. Tesla is taking a cautious approach, with CEO Elon Musk emphasizing safety. ⁽⁴⁾
Robotaxi’s Importance to Tesla
Musk has tied Tesla’s fate to the performance of its robotics and AI business. He forecasts that autonomous vehicles could add $5 to $10 trillion to Tesla’s market capitalization, which is currently around $1 trillion.
Tesla’s core business of manufacturing vehicles is under pressure and sales are declining as a result of increased competition. Tesla also has faced backlash from some owners and car buyers because of Musk’s work in the Trump administration. ⁽⁵⁾
Tesla’s Robotaxi Competitors
Industry leader Waymo said it makes more than 250,000 paid trips a week in San Francisco, Los Angeles, Phoenix and Austin. That business currently operates at a loss, but the company has said it sees a path to profitability. ⁽⁶⁾
Zoox is available for use by its employees and invited guests in Las Vegas and the San Francisco Bay Area. It plans to launch in Austin and Miami and is being tested in Los Angeles, Seattle and Atlanta. Other companies have permits to test autonomous-vehicle technology, but most aren’t able to offer rides to the public. ⁽⁷⁾
Looking Ahead
Tesla has indicated it plans to expand services quickly to San Francisco, Los Angeles and San Antonio. Musk said he expects hundreds of thousands of Tesla vehicles driving fully autonomously on roads in the US by the end of 2026.
Musk expects many of those will be personally owned vehicles running Tesla’s most-advanced version FSD software. He has compared his plans to a combination of the vacation-rental company Airbnb and Uber Technologies. ⁽⁸⁾
But Tesla still faces some regulatory hurdles. Currently, autonomous vehicles are regulated at the state level and, in some cases, by cities. Musk has called for federal regulations, which would make it easier for the company to deploy its software on Tesla vehicles across the US. ⁽⁹⁾
