Emperor Blog
Tesla Self Driving Technology
Tesla recently reported its Q3 results beating analysts' expectations with earnings per share of 76 cents vs 57 cents expected. Gross margins rose from 18.7% to 23.7%. However, it is worth considering that green regulatory credits accounted for $397 million during the quarter, nearly double previous reporting and this is a risk factor going forward as this can change depending on the regulatory regime.
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This note, though, is not focused on operating results but on what Elon Musk has termed “Full Self-Driving” mode. This is now being made available to Tesla owners via an over-the-top paid update.
Tesla is going ahead with this despite warnings over safety and industry competitors such as GM, Ford, Uber, Waymo, and others saying that this is not true self-driving as an active driver is still required in the front seat.
The main dispute is the Tesla is using to achieve this. Nearly all self-driving cars utilize Lidar* whereas Tesla is utilizing ordinary cameras and a type of radar connected to a neural network. Experts warn that unlike Lidar (laser-based that can detect shape and depth even in bad weather), cameras cannot detect true shape and depth, particularly in bad weather.
Lidar is expensive and adds to the production cost of a car, thus not utilizing it is a key advantage. However, Musk, in typical fashion, in the earnings call stated he wouldn’t use Lidar even if it “were totally free”.
Essentially Tesla is utilising software, its neural network, to overcome its hardware shortcomings.
Tesla vehicles have driven a total of 12.2 million autonomous miles, a significant achievement (in comparison Waymo has reported driving 1.45 million miles). Tesla has argued that it “has a fleet of hundreds of thousands of customer-owned vehicles that test autonomous technology in 'shadow-mode’ during their normal operation.” Shadow Mode allows it to test its technology without triggering them in the real world. This is another key competitive advantage of Tesla and hard for existing car companies to catch-up to.
Tesla is releasing this version to the public way ahead of competitors which could be a key competitive feature, or a great risk if it turns out there are bugs and accidents result. It costs about $8,000 to load “Full Driving Mode” onto a Tesla car, essentially at zero marginal cost to Tesla and thus straight to the bottom line (R&D is not a marginal cost).
*Lidar, which stands for Light Detection and Ranging, is a remote sensing method that uses light in the form of a pulsed laser to measure ranges - wiki
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