Why The NHTSA Ruling On Tesla Autopilot Comes As A Major Relief To The Company

January 25th, 2017 by Trefis Team

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Tesla Motors (NASDAQ: TSLA) received a major boost to its development of self-driving cars when the United States National Highway Traffic Safety Administration’s Department of Investigation closed its review of a fatal accident of a Tesla Model S while it was on autopilot. The investigation concluded that there was no problem with Autosteer, the key part of Tesla’s Autopilot, and confirmed Tesla’s claims that when used properly the system reduced crash rates by almost 40%. The investigation found that Tesla vehicle crash rates dropped from 1.3 accidents per million miles driven to 0.8 after the introduction of Autosteer.

This is important news for the company and gives its efforts towards building a self-driving Tesla car sharing program a major boost. Last year, the company announced the second master plan for the company. Recall that the first iteration of the Tesla Master Plan was about how the company would fund the production and scaling of deliveries of its mass market electric vehicle Model 3. The second focuses on the introduction of new automatic features in Tesla’s vehicles that would make them 10 times safer than manual driving and a plan that would Tesla vehicle owners to make money on their investments in Tesla vehicles while they weren’t driving.

Both these efforts rely on the possibility of introducing autonomous driving capabilities in Tesla’s vehicles. In the past, Tesla’s management has been approached with questions regarding potential partnerships with ride sharing companies like Uber. However, the company introduced its own plan that would allow a fleet of Tesla vehicles to be shared among customers, allowing Tesla owners to earn money from their vehicles. Since the company hasn’t released any concrete details about such a plan would work, there are a few possibilities that come to mind. The most likely of these plans involves the activation of the self-driving features in Tesla models that would enable these models to be called for rides by potential customers when their owners do not need these vehicles. Details about how these ride requests would be made have yet to be determined. One alternative would be through an app that either aggregates rides from different fleet services or an app developed and maintained by Tesla itself. Nor has a pricing model been determined, though two possibilities include: 1) pricing for these rides set centrally by Tesla following the Uber model; or 2) competitively by people offering the rides, like Sidecar. These details will be crucial to the viability of this plan. Still, the likelihood of these developments would have been reduced greatly if Tesla’s efforts to build autonomous driving capabilities into vehicles had been given a setback by the NHTSA judgment.

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Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such lean communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com

2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Tesla Motors

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