We left Tesla’s Autonomy Investor Day feeling more optimistic about the company’s long-term prospects. Our takeaways from the event:

• We are more comfortable with Tesla’s camera-based (non-LiDAR) approach to autonomy. If correct, this approach could actually be preferred (safer, more reliable, efficient, better design) and afford Tesla a several-years headstart as other players unwind LiDAR from their solution.
• Our test ride in a Model 3 equipped with full autonomy was, at times, jerky but overall most impressive.
• We believe it’s likely that Tesla will both sell and operate autonomous vehicles.
• Autonomy will take longer than Tesla thinks but will be bigger than Tesla thinks. The initial rollout of these vehicles will likely be 1-3 years later than the company’s end of 2020 target.
• We were given more detail on Tesla’s plan to own and operate a fleet of self-driving “robotaxis” and enable Tesla owners to add their personal vehicles to the fleet once full autonomy is widely enabled.
• Musk suggested Tesla could, in about 10 years, operate up to 10M of their own robotaxis, which he thinks can generate a gross profit of about $30k per car per year.
• The implications of this are staggering. If you take Musk’s comments at face value (which we don’t recommend), the company could go from a loss of $1.3B in 2019 to over $300B in gross profit in 10 years.
• Given investor optimism on the autonomy theme, we believe this is the right time for Tesla to raise money (debt or equity) to de-risk the story with additional working capital.

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