TSLA Cybercab Sees Fork in Road Between Safety & Production

0:00For more, let's welcome and garrot Nelson, vice president and senior equity analyst at CFRA Research and Carl Brow executive analyst at iccars.com. Carl, let's start with you here. I mean, what stood out to you most about this Ibercab from a technology and engineering standpoint? It's got a pretty impressive pedigree in terms of its technical aspects, whether it's the no rare earth metals that are in the 219 horsepower battery that can apparently deliver over 400 miles of range, which is incredibly efficient range level for that small of a battery. And there's no brake traditional brake system. It does not have any brake lines or hydraulic fluid. It's all being done through electric motors and switches right at each wheel. So it's clear that Tesla really wanted this vehicle to be ahead of the game in terms of its technical pedigree in terms, and that would enable it to have very efficient range and hopefully lower cost lighter weight. All the things you want from

1:00any vehicle, but those vehicles seems to be well ahead of the average electric vehicle out there now. And Garrett, I mean, the engineering is impressive. I mean, you can see that, but the bigger question is here. Can Tesla. Safe enough to operate without a steering wheel without pedals. I think it also doesn't have any mirrors because there's no driver. I mean, how are you looking at this as a truly scalable option now that we also have a federal investigation underway? Sure. I mean, the first thing is that federal safety rules currently cap the production of vehicles that lack a steering wheel and pedals at 2,500 units per year unless the manufacturer gets a special exemption. So, you know, as you mentioned, Tesla is attempting to self-certify that has prompted a investigation by the NHTSA. You know, we saw a similar situation last year with Amazon

2:00and their zoos. They attempted to self-certify NHTSA, began to investigate in Amazon, eventually, with Drew that claim. And then eventually they were granted a limited federal exemption for operation of the vehicle. So, the regulatory path is unclear. And the vehicle is a very important thing to consider. And we think that's really going to hamper Tesla's ability to scale, which is really what is the primary reason why the stock trades at such lofty multiples. I mean, you're looking at the stock here, trading at roughly 170 times projected EPS for 2027. So, and I think that's one of the reasons why we're at a hold. It just, we're a little skeptical about the cost of the vehicle. And so, the market is going to be a little bit more quickly. The company can ramp up and

3:00expand, you know, beyond this limited geofence area of Austin where they're currently operating into other markets, which is a really key component of the valuation. And Carl, how are you looking at the hurdle on the regulatory side and how significant that is here because as Garrett just highlighted, Amazon with a different route with zoos, they got their approval, their two-year exemption here. So, I think that's a good point. I think that's a good point for the people to find a vehicle in the ways they were able to, or with what they were able to meeting, they had some parts that didn't meet it. So, they just sort of left those off the table. I mean, how are you looking at this in terms of their progress going forward with the restrictions in place? Well, it's very kind of standard Tesla and Elon, right? Just kind of go his own route and we'll figure it out on our own and everyone else will catch up to us eventually on where we're at. I think that's his approach often we've seen it before and here we are again. But, you know, it's true that until they get this approved at a level that they can do widespread use and rollout, they're going to really be limited in the

4:00functionality of these cyber caps, no matter how technologically advanced they are. And I feel like that's kind of the diametrically opposed, you know, or the two worlds that we're living in right now with a lot of this technology and Tesla's a great example. You've got this very advanced vehicle, more advanced than a lot of electric vehicles right now. At the end of the day, you have to have fully capable, consistent, safe, self-driving technology. And the full self-driving system that are in consumer cars right now for Tesla is impressive. There's a lot of people out there experiencing amazing things. But you can't be close or you're going to have losses. You've got to essentially be at the level of like airline travel in terms of flawlessness. And until we get there, any company, including Tesla gets there, all the rest of this is kind of a, you know, just an exercise in playing around with a whole new kind of cultural world we can live in with self-driving cars. But we're not there yet. And I don't know who's going to get there first. Tesla could be the first, but they might not. I think Garrett quickly here because we're running a little tight on time. But what do you need to see from

5:00Tesla in terms of a production volume utilization, economics before you say that you can see this becoming a meaningful business rather than simply another Tesla promise. Yeah, really comes down to regulatory approval, as Carl mentioned, the potential liabilities just masses. So I think that's why you're seeing Tesla take a more cautious approach versus some of the proclamations that were made several years ago about how quickly FOIL autonomous vehicles would be available. Human drivers are very safe. And so that autonomous vehicle, the real challenge is getting, you know, those final hundreds and thousands of vehicles that are not going to be able to be able to get in the car and that's the real challenge. And that's the phase we're in right now with autonomous vehicles is getting them where they're as safe or safer than a human driver. And that's, we think, is probably going to take several years. Yeah, certainly something we'll keep talking about but really appreciate you both being with us today. Tesla slightly higher on the

6:00session. Rob about 6. Tense of a percent. Garrett Nelson, VP and Senior Equity Analyst at CFRA and Carl Brower, executive analyst at iccares.com. Thank you. Thanks again.