Tesla risks losing its lead without an inexpensive EV


Rows of Tesla vehicles await delivery.
Image Credits: Toru Hanai/Bloomberg / Getty Images

Elon Musk’s decision to green-light a robotaxi over an affordable EV might cost the company its lead.

Last week, Musk reportedly canned the effort in favor of a robotaxi, the sort of pie-in-the-sky project that defined his first decade at the helm. There’s an argument to be made that the company is where it is today by betting big, then delivering on enough of its promises to impress shareholders and generate significant positive cashflow. Problem is, in the early days, there was both everything and nothing to lose. The whole company could have gone under, but there was also less on the line.

Today, Tesla is no longer the plucky upstart. It brought in nearly $100 billion in revenue last year and earned net profits of $15 billion, the sort that would have other automakers rewarding shareholders with richer dividends. It’s a global manufacturer that cranks out hundreds of thousands of cars every quarter, the type of operation where success is measured in continuous improvement in productivity and process indicators.

Tesla was reportedly on the cusp of building a $25,000 EV. In January, Musk confirmed that the company would begin construction of a next-generation vehicle at its Texas plant in the second half of 2025. Suppliers had been asked to bid on parts contracts, Reuters reported, with weekly production volume starting at 10,000 vehicles per week. Given flagging sales of the company’s existing product line, it would have been a welcome shot in the arm.

An inexpensive EV would have significantly increased Tesla’s total addressable market by dramatically undercutting the average sales price in the U.S., which is currently at around $47,000. It also would have given the company a product to hold its ground against a predicted onslaught of inexpensive Chinese EVs.

But it also would have meant creating a production line from scratch, something the company last did at scale with the Model 3. By all accounts, that wasn’t a fun experience.

Building a robotaxi, though. Now, that sounds like fun.

Musk has long been enamored with the concept. Four years ago, he said that such a car would be able to earn its owner up to $30,000 per year as it ferried paying passengers to and fro. It would be so popular, Musk reportedly told biographer Walter Isaacson, that “there is no amount that we could possibly build that will be enough.”

Problem is, Tesla has been trying to master autonomous hardware and software for a while now, and it doesn’t appear anywhere close to delivering a vehicle capable of Level 5 driving, which would require zero human input. Despite years of work, Autopilot remains a Level 2 system, which means it requires human attention at all times. The same is true for Full Self-Driving. (Indeed, the company recently started using the term “supervised” when referring to the software suite.) And while artificial intelligence has been advancing rapidly of late, is it moving quickly enough to provide Tesla with a blockbuster product in the next few years?

Given Musk’s desire to pursue exploratory projects, the logical path would be to spin up a skunkworks inside Tesla or spin out a division that’s purely focused on bringing a robotaxi to market. The latter is unlikely to happen because much of Musk’s wealth is tied up in Tesla stock, and he probably doesn’t trust anyone else to run the company when that much money is on the line. The former has more of a chance, but Musk also likes to appear heavily involved in, well, everything at Tesla. He’d balk at the idea of “only” running a skunkworks.

It’s something that Tesla’s board should probably be weighing in on. And maybe they are. But numerous reports have also illustrated just how tightly linked that board is with Musk. They don’t appear to disagree on much, and that could cost Tesla its lead.

More TechCrunch

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

2 days ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

2 days ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities

For Mark Zuckerberg’s 40th birthday, his wife got him a photoshoot. Zuckerberg gives the camera a sly smile as he sits amid a carefully crafted re-creation of his childhood bedroom.…

Mark Zuckerberg’s makeover: Midlife crisis or carefully crafted rebrand?

Strava announced a slew of features, including AI to weed out leaderboard cheats, a new ‘family’ subscription plan, dark mode and more.

Strava taps AI to weed out leaderboard cheats, unveils ‘family’ plan, dark mode and more

We all fall down sometimes. Astronauts are no exception. You need to be in peak physical condition for space travel, but bulky space suits and lower gravity levels can be…

Astronauts fall over. Robotic limbs can help them back up.

Microsoft will launch its custom Cobalt 100 chips to customers as a public preview at its Build conference next week, TechCrunch has learned. In an analyst briefing ahead of Build,…

Microsoft’s custom Cobalt chips will come to Azure next week

What a wild week for transportation news! It was a smorgasbord of news that seemed to touch every sector and theme in transportation.

Tesla keeps cutting jobs and the feds probe Waymo