Before introducing the second generation Autopilot hardware, Tesla CEO Elon Musk said that once the first truly self-driving car is available, all other vehicles without the technology will have a “negative value”.
Echoing the idea, Morgan Stanley analyst Adam Jonas said this week that they started warning their clients that if Tesla is successful in enabling fully self-driving capability on its current vehicles equipped with the second generation Autopilot hardware, it could render all other cars obsolete.
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Fresh off his note about the Tesla Model 3’s self-driving capability giving ‘superhuman’ safety to drivers and be ’10x safer than current cars’, Adam Jonas went on CNBC yesterday to drive his point.
Jonas has long been promoting the theory that the combination of ride-sharing, electric cars, and self-driving will significantly change the auto industry from being measured on the basis of cars sold to the basis of miles driven.
He thinks that it will particularly advantage the generally more expensive electric vehicles:
“Well, we think the electric cars for private use really are … for human driving pleasure for wealthier individuals. That’s why it’s so important that in the shared model where you’re not driving 10,000 miles a year, but 50,000 or 100,000 miles in a fleet operation, then the economics of electrification you can get that pay back period under three years. That’s the game changer — shared.”
Once you had the self-driving factor, the used car market could be affected significantly by this scenario:
“Our work on used car value is focused on the technological obsolescence of the 250 million cars on US roads today – 2 trillion dollars worth of cars. Tesla’s cars can get better because they can learn. They put in that equipment so that the vehicle 5 years from now is much more superhuman and much better than the one that is just learning and watching right now. Our used car thesis is that in a 5-year period we are running scenarios of used car value being off by as much as 50%.”
He is referencing the fact that all of Tesla’s vehicles since October 2016 are equipped with supercomputers and the necessary sensors to enable fully self-driving capabilities.
Of course, it’s all dependent on Tesla’s ability to actually deliver the software to properly use the hardware for a level 5 self-driving system, which is still far from a done thing.
Jonas even predicted that policy changes will be needed in the next 3 to 4 years due to the impact it will have on the market.
Here’s the interview: