Will Robo-Taxis Replace Personal Cars?


“We are also working on a new vehicle … a dedicated robotaxi. … it is fundamentally optimized to achieve the lowest fully considered cost per mile or km when counting everything.\”

Elon Musk

I recently watched YouTuber \”Dr. Know-it-all Knows It All\” talking about his view on Tesla\’s strategic robo-taxi goals (1). This is a topic that I\’ve been thinking about for a while. I\’ve been pondering writing about it. So, this video gives me the reference and motivation to say a few things. I wrote him an email with my thoughts.

Hi John,

The general idea you present about Tesla \”betting the company\” on robo-taxis is absolutely correct. (Although I don\’t think that the bet is as critical or crucial as Elon\’s bet on the Model 3. I suspect that Tesla will survive and thrive regardless.)

The core question of the bet is, how many robo-taxis does the world need? Where is the saturation point? And how many people will actually replace automobile ownership with a robo-taxi service? Will you? I don\’t think I will. (Please see below for why not.)

For instance, will the person (the first owner) that got rid of the Dodge Caravan, which I purchased for $10 k with less than 50 k miles on it be highly motivated to save a few dollars on transportation costs and use a robo-taxi instead of buying a new vehicle? Will they carefully consider the total economic cost of new vehicle ownership? I doubt it. Otherwise, they would have held on to the Caravan and used it for the miles that I\’ve used it. They very likely took a $20 – $25 k loss on the vehicle and moved on to a brand spanking new one. 

While it\’s true that this story is anecdotal, I suspect that it is not an isolated incident. I suspect that it is repeated many times over.

And YES, Tesla\’s position ABSOLUTELY is a bet. No one knows, or really can know or forecast the correct answer to the saturation point question. I approach things from a marketing person\’s perspective. This is not a question that can be researched. No marketing studies can accurately render useable data on this question. It has NO precedent.

Focus group members and marketing survey respondents have NO true frame of reference to compare it with. It is quite like Henry Ford said, \”If I would have asked people what they wanted, they would have said faster horses.\” So we have no idea how this will actually play out. Neither does Tesla. Perhaps the robo-taxi saturation point is a few million vehicles, perhaps it\’s 20 million. Only time and actual experience will tell.

I concede though that regardless, robo-taxis could very likely put a dent in multi-car ownership. Plenty of multi-car families have at least one vehicle, which is mostly a commuter vehicle. With robo-taxis available, the need for that second vehicle could be greatly reduced, if not eliminated. So, in that regard, a robo-taxi-future could have a negative impact on auto sales, and so a negative impact on many auto manufacturers, and a large positive profit for Tesla.

As for me dumping my vehicle for a robo-taxi, I can\’t help but want to expound on this. This refers back to something we\’ve talked about before, but I\’ll illustrate with my example. Because I purchased the Dodge Caravan second-hand for so little, by the time I get around to replacing it, I will feasibly have a cost, all in (purchase, repairs, insurance, fuel, etc) for as little as $0.35 per mile.

I don\’t think I\’m alone in this, which brings up a paradox. The group that might intuitively be thought to benefit the most from using a robo-taxi would be those people in the lower-income brackets. But the truth is that as long as there is a healthy automobile market resulting in a healthy low-end secondary vehicle market, people in that group can experience the lowest cost per mile of anyone, feasibly a cost per mile below the cost of using a robo-taxi. 

Now, however, remove that healthy automobile market, and the dynamics change. We could end up entering a Lord – Serf situation where the rich and powerful own the assets and the powerless own nothing, having no option but to pour their lives into the coffers of the rich.

I’m hopeful that such a thing won’t happen. There is one more marketing truth to keep in mind. Tesla and the automotive industry are not operating in a vacuum. As long as there is free-market competition, inventive people will be allowed to give consumers alternatives. While the garage door may close on legacy auto, the window may open for other companies. Space may open up for companies such as Archimoto, Aptera, and others. 

I plan, for instance, on buying an Aptera vehicle. I may be able to buy one for around $35,000. I have an expectation that the vehicle could last for as much as 350,000 miles. It will come with battery-charging solar panels. So my operating costs could be quite low. If I’m willing to keep the vehicle for its lifetime my costs all-in could be lower than $0.25 a mile.

While this may not work for everyone, my point is that in a free market society, the market tends to move to an equilibrium that benefits the greatest number of people.

It will be interesting to observe how this all plays out.


Below is John\’s reply:

Hey, this is so much fun! Thanks for riffing on my thoughts and adding some really good ones of your own. 

On the marketing front, I like Wayne Gretzky\’s line: \”I skate to where the puck is going to be, not where it is\” (I butchered that but that\’s the basic idea). It truly is difficult for most people to envision this coming world. 

On the effects front, I think that lower income people will actually benefit most from this in the short term. My son drives Uber, and I did it for a while as a lark (back when I had spare hours in the day), and many of the people taking it are paying much more per mile to get to work or the grocery store – but they can\’t afford the up-front cost of a 10-20k car, even if that would save them 70+% in per mile costs in the long run. A low cost robotaxi that is equal to or undercuts
the ownership costs will be a godsend to these people. 

Then there are folks outside the US who are not nearly as into owning a car for its own sake as we are. Europe is the market I\’m thinking of in particular here. And also those in more urban environments where owning a car is costly and difficult (eg having to move your car and find parking places and charging or fueling up in a larger city). 

We suburban car users will be the last to go down this path: we have garages and enough income to afford a couple of cars. As you say, even here I could see people reducing from 2-3 cars each household to 1-2 cars each. It will create quite the spiral: fewer new cars purchased means fewer old cars for smarter people to buy at reduced cost (good for you btw!) means more expense for those used vehicles, which means more pressure to take robotaxis. 

My rough prediction: assuming regulation allows EU robotaxis (a big if), they will go first and rapidly toward that model. Next (or rather at the same time) will be bigger cities around the globe. Finally will be the US suburbanites, as we really love our cars. Rural US will likely not go robotaxi any time soon. China is a big wild card: they love their cars as status symbols too. 

Eventually I see a market where car manufacturers sell more premium cars for a clientele who can afford this (and they\’ll be much more expensive than now). The masses will have few choices but robotaxis. This could be 15 years from now…. or maybe 10. It really depends on how fast FSD L4 becomes a reality. 


See the video below:



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