SAN FRANCISCO – Tesla (NASDAQ:TSLA) CEO Elon Musk is at it again, on Tuesday he announced that the company has joined the race to make the first mass produced self-driving car, and they hope to release it within three years. By the announcement, Tesla joins Google (NASDAQ:GOOG) and several automakers to be the first to build a self-driving car.
According to Musk, one of the project goals it to allow drivers to hand almost 90 percent of the driving off to the onboard control system; fully autonomous cars would take longer to develop. In undertaking the project, Tesla has been developing their own technology; this is unlike other companies who have been licensing technology from companies like Google, whose fleet of semi-autonomous cars are working on reaching one million miles driven without an accident.
However, the technological hurdles are not the only ones for Tesla, or any other supporter of self-driving cars, needs to overcome. For example, there are numerous legal and safety issues including laws in the European Union that require drivers to control their vehicles at all times. In addition, it is unclear whether auto insurance companies will accept the cars by issuing insurance although several features would appeal to insurers.
Drivers themselves could also balk at the idea of handing over vehicle control and this might be the biggest obstacle to overcome.
Musk’s timeline is also much more aggressive than other automakers, and it could be that he believes the combination of zero-emission vehicles and self-driving technology could help Tesla will a larger share of the multi-billion dollar auto market. This could make sense as analysts have targeted 40,000 vehicle sales per year as the breakeven point for the company.
If anything Musk’s announcement helps to restore the faith of the company’s long investors following his comment on the stock price. The company’s stock has a higher average volume that any other automaker in the U.S. with about $ 1 billion worth of changing hands daily. As such, the current valuation of $ 20 billion is reasonable. While the company has exciting technology, it will have to translate that into market share if it is to move towards profitability. If the company can release self-driving cars before anyone else, it might just reach that goal.
Shares of Tesla were heading up in pre-market activity on Wednesday.