On CNBC Squawk Box interview, billionaire investor Ron Baron discussed his bullish outlook on Tesla’s robotaxi business, specifically highlighting the potential for significant profit generation. Baron stated, “If you do 50,000 miles a year for a car (robotaxi), those cars generate ... 30, or 40 or 50,000 dollars in profits per year. Per car. So every time you have a million cars, you’re adding 30, or 40 or 50 billion dollars to profits per year.”
Let’s break down his claim. Baron’s estimate assumes a Tesla robotaxi can operate 50,000 miles annually, generating $30,000 to $50,000 in profit per vehicle. This implies a profit margin based on high-margin software subscriptions, like Tesla’s Full Self-Driving (FSD) system, and operational efficiencies from autonomous ride-hailing. Assuming a per-mile revenue of $1 (comparable to ride-hailing services like Uber, minus driver costs), 50,000 miles could generate $50,000 in revenue. If operating costs (maintenance, charging, insurance, and depreciation) are kept low—potentially $10,000–$20,000 per year due to Tesla’s cost-effective FSD platform, which uses only cameras—the profit range of $30,000–$50,000 is plausible.
However, several assumptions underpin this forecast. First, Tesla must achieve Level 5 autonomy, allowing robotaxis to operate without human intervention, which is still unproven at scale. Regulatory hurdles, safety concerns, and competition from Waymo, Baidu, and others could delay or reduce profitability.
Additionally, Baron’s estimate assumes consistent demand and minimal downtime, which may not align with real-world conditions like maintenance or low-traffic periods.
While Baron’s $30,000–$50,000 profit per robotaxi is theoretically achievable with Tesla’s cost advantages and scaling, it hinges on optimistic assumptions about technology, regulation, and market adoption. Investors should approach this forecast with cautious optimism, given the complexities involved.