Alex Cho
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Uber and Tesla Motors Teaming Up?

It seems like Uber is making further inroads into the autonomous vehicle space after yesterday’s acquisition of Ottomotto, which develops autonomous transportation technologies. The analysts at Morgan Stanley are anticipating full-implementation of autonomous semi-trucks in the year 2020. Tesla Motors is rolling out a truck in the next several years, which implies that the transportation space is ripe for disruption.

It was mentioned in the Morgan Stanley report that these autonomous trucks could generate a 75% reduction in operating costs, which is why transportation is ripe for disruption especially for commercial drivers.

While, I’m hesitant on anticipating such an aggressive timeline for broad based implementation of autonomous vehicles in the transportation space, I believe that the eventual implementation of these technologies will create challenges for pre-existing truck carriers. As such, investors should take precautions in this specific space, as the risk for technological obsolescence has increased given Uber’s overwhelming passenger share, and well-established track record of disrupting conventional ride sharing ecosystems.

Developments in the software/application space is also supportive of Tesla’s ambition to launch a fully electrical autonomous semi-trailer truck. In other words, the market opportunity for full autonomous functionality is expanding. As such, I get incrementally optimistic on Tesla, but remain cautious given high-dependence on low interest rates, and sustained capital investment needed to reach lofty production goals.

Notwithstanding these challenges, it’s worth noting that TSLA’s growth trajectory isn’t tied to just passenger vehicles. While competition could limit the rapid expansion of TSLA’s market share in the mass market, the other growth levers in semi-trucks provides some downside protection to valuation.

I continue to reiterate my hold rating on TSLA. I haven’t rated UBER, as the stock remains privately owned.