Tesla's Robotaxi launch faces challenges amid brand damage and investor pressure
The recent fallout between Elon Musk and US President Elon Musk has driven a wrecking ball through Tesla's share price. (REUTERS) Notify me
Tesla Inc. already had a lot riding on its highly anticipated robotaxi launch long before Elon Musk decided to swing a wrecking ball through his alliance with President Donald Trump — and the company's share price. Now investors are looking for a win that can help repair the brand damage and shift Tesla back into growth mode.
Musk said Tesla would start the new self-driving car service in Austin as soon as June 22, as part of the EV maker's big bet on artificial intelligence and autonomous driving. While Tesla gave the city an outline of its tentative plans, the company hadn't disclosed a launch date — either publicly or directly to Austin officials — until late on Tuesday, when Musk warned the service's debut could shift because it was 'super paranoid about safety."The proclamation came as part of an all-night series of social media messages by Musk, which included a near-apology that 'I regret some of my posts" about the president, which 'went too far." The comments helped push shares up about 3% Wednesday by investors who have been urging Musk to refocus on his business empire.
The billionaire has said the rollout would start slowly, with 10 to 20 vehicles, and a testing area verified by Bloomberg News suggests the initial contours of the debut resemble more of a souped-up demo than a full-fledged launch.
That may not matter to Tesla's biggest fans, or the stock price. Investors generally have been willing to give Musk the benefit of the doubt in the short term as they believe in his long-term vision.
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For the moment, Tesla sales are tumbling around the world, its stock is down around 20% this year and analysts have lowered their expectations for the company's performance. While Musk tries to undo some of the damage from his meltdown with Trump, the immediate impact to Tesla's shares and Musk's own wealth shows just how delicate the whole balance is. The government has outsized influence over his businesses, from billion-dollar contracts to the regulatory environment for autonomous vehicles and Tesla's robotaxi network.
'He needs to dial down the rhetoric and the drama and get back to the business of Optimus and robotaxi and Full Self Driving," Nancy Tengler, CEO and chief investment officer of Laffer Tengler Investments, told Bloomberg Television. 'That is what people own the stock for — and for his brilliance and genius of course — but not for the histrionics."
Musk has promised to establish a ride-hailing network that is part 'Airbnb, part Uber." The company wants the fleet to built on its Full Self-Driving technology and eventually feature both purpose-built Cybercabs without pedals or steering wheels, as well as Teslas owned by the company and individual drivers. Musk predicts hundreds of thousands of the vehicles on the road by late 2026. The robotaxi launch is the first step in showing investors he can deliver.
Tesla will be the fourth robotaxi service to launch in Austin in the past several years. While Tesla can operate its standard consumer models in Texas with no driver, it needs federal exemptions to use the Cybercab in its fleet. In other states, including California, Tesla faces a patchwork of regulations.
Representatives for Tesla and Musk did not respond to requests for comment. Testing Grounds
There have been signs of the company's preparation in Austin. Model Y vehicles with manufacturer's plates have become a frequent sight around town in the south and southeast portions of the city that are studded with residential neighborhoods and retail shopping centers and a few minutes drive from downtown. In some cases, the vehicles drive around in what appear to be circular routes.
The initial operation area will likely cover only a few square miles, according to a person familiar with the plan who was not authorized to speak publicly on it. The zone could change before launch or be amended quickly after the service begins.
The rules governing driverless vehicles in Texas are notably light. While rideshare companies with human drivers must obtain a license to operate in Texas, a legal loophole means robotaxis like those operated by Tesla don't need the same approvals, according to the Texas Department of Licensing and Registration. That makes the state a popular choice for companies in the early stages of autonomous service.
Waymo, the driverless-rideshare business owned by Google parent Alphabet Inc., currently has about 100 robotaxis in Austin in partnership with Uber and plans to ramp up to hundreds over time. Volkswagen ADMT and Amazon.com Inc.'s Zoox are testing their vehicles there. A number of autonomous trucking companies are also testing elsewhere in the state.
Tesla has embraced a different approach to autonomy, favoring a camera-only system rather than a combination of lidar, radar and pre-mapping that competitors use. Musk has long claimed such an approach will allow the company to scale up sooner than rivals including Waymo, which he considers too expensive. According to some estimates, Tesla's system of sensors costs about $400 per vehicle; Waymo's fleet, which totals 1,500 vehicles in California, Arizona and Texas, runs roughly $9,300 per car. Critics have said Tesla's vision-only system is riskier as it's more limited in certain conditions with less visibility, such as sun glare, fog or dust.
Regardless of the vehicles' specifications, autonomous vehicle testing in Austin and elsewhere has brought challenges. General Motors Co.'s now-defunct Cruise dragged a person along a street in San Francisco in a gruesome incident that left the pedestrian in critical condition. Driverless rideshare cars have caused viral traffic jams in Austin and last week, Waymo drove into a flooded area following a storm.
'Safety is our highest priority at Waymo, both for people who choose to ride with us and those with whom we share the streets. We remain committed to improving road safety through our ongoing learnings and experience," a Waymo spokesperson said.
In preparation for its launch, Tesla has been in touch with Austin city officials and first responders to discuss safety expectations, according to emails seen by Bloomberg News that date back to at least May 2024. Tesla has said robotaxis will be remotely monitored initially.
But several key aspects of Tesla's plan are yet to be finalized with the city's autonomous vehicle working group, which communicates with AV companies operating in Austin. Tesla has only shown officials a draft of an expected first responder guide, and an emergency training is still outstanding, according to Andre Jordan, division chief of homeland security and special operations for the Austin Fire Department, and a member of the city's working group.
'Autonomous vehicles are required to follow the law, but what happens when the law and directions of first responders conflict? It's a complicated world," said Jordan. Brand Damage
It's also a complicated moment for Musk to pitch Tesla as a trusted brand to take passengers, many of whom aren't accustomed to riding in self-driving cars, where they need to go. Thanks to months wading through the political fracas in Washington, the billionaire and his cars have never been more polarizing.
Although Musk has sought to dial down the hostility with the president, the billionaire's public spat with Trump threatens to alienate even more customers.
'Tesla at this moment is a brand with all sorts of mixed associations," said Tim Calkins, a marketing professor at Northwestern University's Kellogg School of Management. 'If people have negative feelings about Elon Musk and they spill onto robotaxi, I don't think they'll be eager to take a ride. There's lots of alternatives."
Driverless vehicles require an extra element of trust and critics will be ready to amplify any mishaps, said Mike Paul, president of crisis consultancy Reputation Doctor LLC.
'When you're starting from a deficit currently, from a trust in branding perspective, with all things Elon," Paul said, 'it's going to be very difficult to show success."
Musk has been building expectations for this launch for years. While some investors are willing to lend him some leniency on timing and the exact details, many want concrete signs of progress.
Baird analyst Ben Kallo downgraded Tesla to neutral, citing, in part, overhyped expectations from Musk around the robotaxi launch and intensifying competition in the space. Kallo also said that Musk's deteriorating relationship with Trump has led to more uncertainty.
'The valuation has gotten ahead of itself around the robotaxi," Kallo told Bloomberg Television. 'I do think the rollout will take longer. At first it will require more people, so people in control centers making sure that the cars do not get into accidents something like that."
For that reason, Kallo said there will likely be some short-term pain. 'Rolling this out will be very difficult."
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First Published Date: 12 Jun 2025, 08:24 AM IST
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