One of the biggest innovations going on in the automobile market right now is autonomous driving. While many car manufacturers have developed some form of self-driving capability, electric vehicle (EV) pioneer Tesla (TSLA -1.07%) seems to fetch the most attention. The company was supposed to showcase the progress of its autonomous driving fleet, dubbed robotaxi, on Aug. 8. However, Tesla CEO Elon Musk canceled the event at the last minute and rescheduled it for Oct. 10.
In the midst of all of this hoopla, ridesharing platform Uber Technologies (UBER 1.43%) has taken some shots at robotaxi's viability. Just a couple of days ago, Uber announced a partnership with General Motors -- a rival to Tesla in both electric vehicles (EVs) and autonomous driving. Let's take a look at Uber's new partnership and assess what it could mean for Tesla investors.
What is Uber doing with General Motors?
Uber has a number of relationships with car companies seeking to disrupt the autonomous vehicle market. Most notably, Uber works closely with Waymo -- a subsidiary of Alphabet. In late August, Uber announced that it is also teaming up with a subsidiary of General Motors, called Cruise.
Per the press release, Uber plans to begin rolling out rides featuring Cruise's autonomous vehicles next year. This means that users on Uber's app may be presented with an option to be picked up in a driverless Cruise vehicle as opposed to a standard Uber ride featuring a human driver.
While this looks exciting on the surface, I question if this is the best move for Uber.
Image source: Getty Images.
Don't judge a book by its cover
Cruise has raised funding from the likes of SoftBank, Microsoft, Honda, and even Walmart. Indeed, that's a pretty impressive roster of investors.
However, Cruise has not been without problems for quite some time. Late last year, Cruise had to suspend operations in San Francisco due to safety concerns. This incident led to the company's management voluntarily suspending operations across the nation. Unsurprisingly, Cruise initiated a vehicle recall program and eventually its CEO and founder Kyle Vogt resigned.
To be frank, things haven't really turned around for Cruise in 2024 either. During General Motors' second-quarter earnings call, investors learned that Cruise is delaying production of its next-generation vehicle, Origin. As a result, GM recorded an impairment charge of $605 million related to Cruise Origin.
On top of all of this, Cruise's operating losses were $458 million during the second quarter and have totaled $900 million through the first six months of the year. Cruise has been far from a moneymaking machine for GM, and I question whether its deal with Uber will lead to much.
Should Tesla be worried?
Uber certainly stands to benefit from autonomous vehicles as the company can save costs related to driver commissions. However, I think Tesla has more use cases when it comes to large-scale self-driving car fleets.
For example, Uber competes with delivery services such as DoorDash and Instacart. In theory, should Tesla pull off a wide-scale commercialization of robotaxi, the company could form partnerships with various delivery platforms and take on Uber more directly.
Another use case for autonomous vehicle fleets could be car rental services. Although both Uber and Tesla could benefit from forming partnerships with car rental companies, I think Tesla has the edge due to its production capabilities. Cruise has yet to prove that it can mass-produce its vehicles, which is a problem when it comes to penetrating new markets.
As a Tesla investor I am not worried about the prospects of Uber entering the self-driving car space. I think the addressable market is large enough to have multiple players. Furthermore, given all of the headaches surrounding Cruise over the years, I sort of see its deal with Uber as more of a lifeline than a real opportunity. To me, Uber's partnership with Cruise is an interesting development but I don't necessarily see it as a big threat for Tesla.
For all of these reasons, I think Tesla will handily outmaneuver Uber and Cruise and do not think the robotaxi initiative is in jeopardy.
