ARK Invest on Tesla's $11 Trillion Opportunity

ARK Invest on Tesla's $11 Trillion Opportunity

This is a changing world, thanks to advanced technologies and new innovations being delivered faster than ever before but there's one change that could be here sooner than you think and that is autonomous vehicles which could be one of the most meaningful innovations of all time - and Tesla is in the best position to take majority share!

Imagine giving every person who commutes an hour back each and every day - what a gift when you can never get back your time after each day. Why is tesla one of the only companies really tackling this challenge? The latest research on the autonomous vehicle market, if you're interested in Tesla's progress, the let's see what Tasha Keeney, an ARK Invest analyst has to say:

She thinks that autonomous cars could be very inexpensive to consumers and that autonomous taxis and ride hailing systems could dominate urban transport and ultimately we think this could be one of those most meaningful economic productivity delivering innovations of all time.

She thinks that the GDP contribution from autonomous ride hail systems could total around $26 trillion by 2030. She expects the price per mile that you could profitably charge a consumer could be about 25 cents per mile well below the price of point-to-point mobility, which really hasn't changed since the Ford Model T rolled off the first assembly line thanks to higher utilization rates that cost could be as low as 25 cents per mile.

Of course there'll be a lot of benefits to autonomous cars we think they'll be a lot safer and they'll be extremely convenient, but what do we think will drive demand that is this price autonomous ride hill should attract not only people that are in the ride-hailing market today, but also car owners and consumers value their time at about 60 cents to a dollar ten per mile on average.

Time spent on commuting to work related travel - the low end of that is time spent on errands or personal travel but today consumers pay about two dollars per mile on average for ride hailing in western markets that's about the average price of an Uber today so they're already paying up for this additional convenience of ride hail notably this is also much higher than the marginal cost to drive - the cost of gas, insurance, all the costs that you pay in a day-to-day or on an annual basis.

This is as opposed to to the fixed costs which are also included in our 70 cents per mile estimate so the marginal cost is about 34 cents per mile and importantly if you go back to that 25 cents per mile estimate that we have that's going to be lower than even the the marginal cost to drive that 34 cents so you can imagine that there's going to be a swath of demand worth at around $134 billion dollars.

Ride Hailing Price Points

We see in today's ride hailing options that two to four dollars per mile which is mainly in western markets then at about $990 billion dollars of opportunity that will be for western markets supplanting commuting miles this is at the higher end of that value of time analysis that we did and then another $2.4 trillion dollars of opportunity for non-commuting miles so this is again western markets the value that people place on their personal driving miles well moving away from western markets - places like China where ride hail is already extremely cheap that's another $2.75 trillion dollars worth of opportunity so that's coming in at around 50 cents per mile.

That's a little bit lower and then finally there is this super long tail - an additional five trillion dollars of opportunity at that low low cost of 25 cents per mile for autonomous taxis and you know Sam Ark mentioned in this presentation that there could be neighborhood electric vehicles you could picture this being a purpose-built autonomous taxi this is a segment of the market where you bring many more people in that aren't participating in ride hill today because they're all of a sudden getting access to really cheap point-to-point travel.

So all in all this sums up to about an $11 trillion dollar addressable market in the next 10 years, traffic could more than double this is because of course we expect autonomous ride hailing to be cheap and convenient and people might take it more often but again more importantly it could expand the customer base and this could add to miles traveled.

We're seeing the early innings of air taxis so these are autonomous electric machines that fly they can transport individuals or a couple people at once and when air taxis commercialize they could cost roughly the price of what a taxi would cost you from Manhattan to JFK today so an airport cab but you'll get to the airport in about 18 minutes and the trade-off at the time you can imagine will be either you take an air taxi or you take an autonomous taxi - and that the autonomous taxi is going to be a lot cheaper.

Maybe just ten dollars for the whole trip but it's going to take you longer again because traffic will be worse so that's really the trade-off that you'll be making between the two and then finally there is subways we think that mass transit will likely still stay as one of the cheapest options out there and when we look at the enterprise value that we expect off of these systems we think the lion's share of the economics should accrue to the autonomous platform providers these are the companies that actually own the technology stack the company's building the technology that makes the car drive itself so that alone by 2026 we think could be an $11.7 trillion dollar bucket.

My Thoughts

There's a lot more that Tasha Keeney has to say here, but I'm excited for autonomous ride hailing and eventual air autonomous ride hailing. Most exciting is that the costs are going to come down so much. Once autonomous ride hailing is proven to be safe, I think we'll see a lot of people start using it. And Tesla is in the poll position to take most of this market.

Is autonomous ride hailing the most important technology coming up-to-date? Will it be an $11 trillion opportunity? Will autonomous vehicles dominate urban transport?

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Jeremy Johnson is a Tesla investor and supporter. He first invested in Tesla in 2017 after years of following Elon Musk and admiring his work ethic and intelligence. Since then, he's become a Tesla bull, covering anything about Tesla he can find, while also dabbling in other electric vehicle companies. Jeremy covers Tesla developments at Torque News. You can follow him on Twitter or LinkedIn to stay in touch and follow his Tesla news coverage on Torque News.

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