Autonomous driving is the future of Tesla, and to clear obstacles, Musk chooses to deeply tie with politics.

Author/Immaculate,Produced by/New Pick Business Review

For Tesla, the deep tie between Musk and Trump has become a crucial factor affecting its future development.

A piece of news states that the transition team of President-elect Trump plans to establish a federal framework to regulate autonomous vehicles. They aim to create a federal framework for fully autonomous vehicles, making it a top priority for the U.S. Department of Transportation.

In recent years, Musk has consistently promised the launch of fully autonomous vehicles, seeing it as Tesla's primary development direction in the future. However, this promise has yet to materialize, and Tesla has been slow to introduce fully autonomous vehicles. In this context, every step forward by regulators is beneficial to Tesla.

The market has given positive feedback. Even before confirmation from Trump's team and the National Highway Traffic Safety Administration, Tesla's stock price began to rise, surging over 8% intraday on Monday and closing up over 5.6%. Since Trump's election victory, Tesla's stock price has surged over 27%.

I. A New Strategy for Autonomous Driving: Tesla's Second Growth Curve

Tesla is undoubtedly the leader in the electric vehicle industry. However, in the past year, its position has become increasingly unstable.

Tesla's primary markets are the United States, China, and Europe, with the US and China being its first and second-largest markets. In the US, Tesla faces no significant competition. According to CleanTechnica data, Tesla's market share in the US electric vehicle market reached 49.6% in the second quarter of this year. In China, Tesla's situation is deteriorating. In October, Tesla's sales in the Chinese market were 40,485 units, a 43.9% month-on-month decline. Meanwhile, BYD sold 500,000 units, a 14% month-on-month increase.

BYD also outperformed Tesla in the third quarter. BYD's revenue reached RMB 201.125 billion, a year-on-year increase of 21.95%, while Tesla's revenue was approximately RMB 179.743 billion. In terms of sales, BYD sold 1.1349 million units in the third quarter, compared to Tesla's 463,000 units. In terms of growth, Tesla only achieved 6.4%, while BYD reached 45.6%. This quarter marked a turning point between BYD and Tesla.

Therefore, Tesla can no longer rest easy and needs to find new growth points. These growth points may come from three directions: AI, lower-tier markets, and autonomous driving. Many automakers now prioritize AI, but this direction lacks clear application scenarios. If it is limited to the cabin area, it may not provide the future Tesla desires.

Regarding lower-tier markets, Tesla has repeatedly stated its intention to introduce lower-priced models. From Musk's comments during the third-quarter earnings call, it appears that this new model, priced at $25,000, must also have autonomous driving capabilities. This allows Tesla to earn from subscriptions and potential autonomous taxi services. In summary, autonomous driving is Tesla's future.

Currently, Tesla lags behind Waymo and Cruise in the field of autonomous taxi services.

Road testing is essential in the research, development, and application of autonomous driving technology, which is where Tesla falls behind its competitors. Taking California, a major testing ground for the autonomous vehicle industry, as an example, six companies currently hold driverless testing permits here. These companies usually conduct at least three years of supervised driver testing before obtaining driverless testing permits, often covering millions of miles.

Waymo has accumulated over 10 million miles of testing and has obtained seven different regulatory permits, including charging passengers for driverless taxi services. In contrast, Tesla has only conducted 562 miles of testing since 2016 and holds the lowest-level autonomous testing permit in California, allowing testing only under human supervision. Regardless of which technology is more advanced, Tesla is undoubtedly constrained by regulators, a problem Musk needs to solve.

As a result, Waymo leads Tesla in autonomous taxi services. In August this year, Waymo announced that Waymo One (its autonomous ride-hailing service) had over 100,000 weekly orders. In November, Waymo One announced the launch of autonomous taxis in Los Angeles.

II. How Far Is Musk's Dream of Autonomous Driving?

From a broader perspective, it will not be easy for Tesla's autonomous taxi business to progress as rapidly as Waymo One.

There's an old Chinese saying, "The one who tied the bell must untie it." This saying can also be interpreted in reverse. While Musk can help Tesla navigate regulatory hurdles, he can also hinder progress. The chair of Trump's transition team previously stated that if Trump is elected president, Musk may not be able to serve in the new government due to potential conflicts of interest stemming from his ownership of multiple companies. If Musk cannot personally serve in the new government, he must find a suitable proxy, introducing variables.

Setting aside competition, the competitive landscape in this field differs significantly from that of the electric vehicle industry.

As mentioned earlier, Tesla holds nearly 50% of the US electric vehicle market, making it virtually unbeatable. However, in the field of autonomous driving, Tesla faces a formidable opponent: Waymo.

Backed by Google, Waymo has nearly inexhaustible resources compared to other startups known as "Tesla killers." After receiving a $5.6 billion funding round this year, Waymo's technology iteration has significantly accelerated, almost on a weekly basis. With technical and experiential support, Waymo One can currently provide 150,000 paid autonomous trips weekly. While Tesla may not fear Google's resources, Waymo's operational head start is a concern. After all, in the ride-sharing industry, there is a significant gap between the first and second places.

Of course, Tesla also has its advantages, primarily in its unique business model.

Tesla's autonomous taxi business dates back to 2016. At the time, Musk first proposed this idea in the second part of his "Master Plan," envisioning a future where vehicles earn money for you by sharing their idle time through large-scale real-world driving data.

There are two main models in the autonomous taxi industry. Waymo adopts a B2C model, purchasing external vehicles, modifying them with intelligent features, and putting them into operation. This model is similar to Uber in profiting from operational price differences, with Waymo bearing significant vehicle costs.

Tesla will adopt a "dual" model. On the one hand, Tesla will launch app-based autonomous taxis. On the other hand, Tesla owners will become part of the fleet. In other words, Tesla's autonomous taxi business combines the models of Uber and Airbnb. Musk has stated that Tesla will establish its own fleet of fully autonomous vehicles, initially operated by itself with lower costs than current bus fares. Later, Tesla will allow owners to join the shared fleet, earning $30,000 annually.

This model offers the benefit of asset-light operation. Since Tesla manufactures its own vehicles, its procurement costs are much lower than those of Waymo, which needs to purchase and modify entire vehicles. In contrast, Waymo adopts a model similar to Uber's ride-hailing service, primarily profiting from operational price differences.

Meanwhile, Tesla can reuse data resources and leverage its scale. With millions of Tesla vehicles already on the road, the company has a strong foundation for training and optimizing autonomous driving algorithms.

From the current perspective, Musk's choice to deeply engage in politics was wise because Tesla's next growth point is autonomous driving. If Tesla cannot overcome regulatory hurdles, all of Musk's previous descriptions will remain unfulfilled.