Robotaxi Competition Revs Up as Tesla Hits the Road in Austin
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As companies create AI-powered solutions, how can they ensure they're effective and trustworthy? Join IBM at the break to hear how companies can build trust in their AI with Hrithika Gunnar, IBM's General Manager for Data and AI.

Welcome to Tech News Briefing. It's Tuesday, June 24th. I'm Victoria Craig for The Wall Street Journal. Tesla has officially entered the national robo-taxi race. So, as competition in the space accelerates, we're making a pit stop to check in on the state of the industry and gauging how enthusiastic consumers are about taking a ride in one of the many driverless cars now roaming America's roadways.

The novel concept of self-driving cars has become more common in a handful of American cities. Just a couple years ago, San Francisco residents wanted robo-taxis to leave their city. Now they're contributing to blockbuster growth for industry leader Waymo. The company, owned by Alphabet, is on track to reach a milestone of 20 million trips by the end of this year.

Elon Musk's Tesla is revving up, meanwhile, to go head-to-head with Waymo in Austin, Texas, after the long-awaited launch of its service. Both companies have ambitions to expand into more cities.

But are consumers as eager as the companies themselves? For a state-of-the-industry assessment, I'm joined by Becky Peterson, The Wall Street Journal's Tesla and Elon Musk reporter, and Katherine Blunt, who covers technology. Becky, let's start with Tesla. How did Sunday's robo-taxi launch go? Yeah, so on Sunday, Tesla invited a small group of its most vocal influencers and fans to download their new robo-taxi app.

And that lets them call for rides on Model Ys, which are cars that we see all around the country already. They have steering wheels and they have pedals, but they're running Tesla's special software so that they can drive without a human behind the wheel. And so far, according to the fans' posts on social media, it's going okay. Musk said before that they would have only 10 to 20 cars on the road to start, and then once...

They figured out how well it was doing. They would expand it. Now, by contrast, Catherine, Waymos have been on the streets of San Francisco and other cities for years. So while Tesla is still trying to get autonomous vehicles on the road or has just done so, Waymo is actually trying to expand now. So talk to us a little bit about how it's trying to break into the New York City market because it's facing a few headwinds here, namely that humans, not robots, are

So the company has said that it needs sort of a special permit issued by the NYCDOT, Department of Transportation, as well as a fairly substantial change to state law in order to really get its fleet on the road in the way that you would see in San Francisco or Arizona or some other places in which it would be able to get its fleet on the road.

The company already has significant inroads. We're in early stages of that. It's not clear exactly what the timeline is going to be, but the company has simply said it's committed to trying to get the right pieces in place to be able to try to compete in New York City, which is obviously a fiercely competitive market with the taxi industry being what it is and Uber and Lyft being entrenched there as well.

plus just the complexity of super crowded streets and complicated geography. So it's going to be some time before we see how that shakes out. Now, Waymo has a roughly four-year head start on Tesla, and that company still is not yet profitable. But Becky, it's interesting because a major Tesla investor projects that ride-hailing could become a more than $900 billion business for Tesla in the next five years and make up 90% of its earnings.

When we think about the state of the industry and consumers' approach to these kinds of taxis, what would it realistically take for Tesla to get to that point?

Kathy Wood's estimate is pretty extraordinary, but she's really influential. And Musk has said that he agrees with her analysis. So that's what the super fans hope is what's going to happen. But car sales still make up about three quarters of Tesla's revenue right now. And, you know, they are charging $4.20 per ride around a small area in Austin. So while Tesla

Robotaxis are currently generating a little bit of revenue. It's really hard to see how they get there. Just to give an example, Uber, which has human drivers, they had gross bookings of around $163 billion in 2024. So that's still a fraction of what

Cathie Wood's firm has said they think would be Tesla's revenue. And in all likelihood, they'll be dividing the pie with Waymo and other competitors. Catherine, when we think about this sort of proposition for Alphabet and more competition from the likes of Tesla and other companies, how is this leader in this industry sort of preparing for increased competition?

Certainly, you see the efforts to expand in other lucrative cities. You see efforts to expand services in the cities in which they're already operating. There is a recognition that a competitor like Tesla eventually could be serious for Waymo, but Waymo has a head start and continued to invest in this industry and in this technology at a time when others were waffling on it or faltering.

We've seen what Cruise, which was a GM-backed company, used to be considered a pretty serious competitor to Waymo, but they ultimately scrapped the project after some really significant challenges that were safety-related.

And it's probably too soon to figure out exactly what this means for Waymo, given its head start. But it certainly doesn't show signs of slowing down or becoming complacent at this juncture. Coming up, a desire to expand is one thing, but consumer politics and local regulations are another. We'll be back with Becky Peterson and Catherine Blunt to get into all of that after the break.

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As Tesla CEO Elon Musk discovered over the course of the last year, business and politics are hard to mix. While Musk was focused on Doge's cost-cutting at the federal government, his company lost ground to its Chinese rival in Europe and faced consumer backlash at home. Now the billionaire tech titan looks to woo consumers to his newly launched robo-taxi service in Austin, Texas.

We're back with Becky Peterson and Catherine Blunt to talk about the state of this growing industry. Tesla has had its own set of politics-induced setbacks. But Catherine, let's start with you, because Waymo recently made headlines for the way it was swept up at the immigration protests in L.A. Has that affected confidence or ridership?

It's hard to say whether it's changed consumer sentiment around Waymo specifically, but the company recognizes the need to be attuned to what may be happening in terms of just political gatherings and demonstrations and determining whether it needs to limit giving rides to and from those areas of hot activity, so to speak. You saw that in LA after the fires, and the company also took similar steps to limit some of its service offerings in San Francisco as well as some of this was going on, and I'm sure we'll see more of the same going forward.

Becky, when it comes to Tesla, we know that safety was an issue for critics of Tesla ahead of this robo-taxi rollout. You talked to some of those people. But also with politics, that also comes into play when you have a CEO like Elon Musk, who has spent the last six months at Doge and involved in the Trump administration. How big of a risk is that for racking up users of the Tesla robo-taxi service?

A big part of Elon's vision for how this would work is that people will buy new Teslas and then they'll put their personal cars onto the robo-taxi service. So like if you go to bed, your car could go and do rides and you can earn revenue and Tesla can earn revenue.

And we know that politics have hurt car sales, so there's reason to think it might hurt that part of the dream. But you'll also notice that Tesla's robo-taxis have very different branding than Waymo's. They have this edgy, sharp font that makes it seem a little heavy metal. And the purpose-built robo-taxis that they have planned, like the CyberCab, which has

gold color and two doors and it's very futuristic looking, they are going to go for a different demographic than Waymo. People might be drawn to it because it has this branding that makes it feel futuristic.

We talked earlier about Waymo and the rules change that needs to happen in New York City for it to expand here. But for Tesla, Musk has been pushing for federal autonomous vehicle rules. How is the company sort of affected by all of this? And could those rules change? How likely is that? Yeah, currently it's done on a state and city level, which the states and cities are pretty happy with because communities are interested in regulating how these things are used in their cities.

Sean Duffy, the U.S. Transportation Secretary, has taken some steps to indicate that he's interested in doing more work with a federal autonomous vehicle framework. And just recently, NHTSA, which regulates vehicles, they streamlined the process for getting non-conforming vehicles on the road. So it would make it easier to put a car out there that doesn't have a steering wheel or pedals on.

But so far, it's still regulated locally. And beyond the U.S., he's also going to have to get regulations across Europe and Asia.

That currently restricts how far he can expand the service. That was Wall Street Journal reporters Becky Peterson, who covers Tesla and Elon Musk, and Katherine Blunt, who covers technology. And that's it for Tech News Briefing. Today's show was produced by Julie Chang with supervising producer Melanie Roy. I'm Victoria Craig for The Wall Street Journal. We'll be back this afternoon with TNB Tech Minute. Thanks for listening.

How can companies build AI they can trust? Here again is Hrithika Gunnar, General Manager for Data and AI at IBM. A lot of organizations have thousands of flowers of generative AI projects blooming. Understanding what is being used and how is the first step. Then it is about really understanding what kind of policy enforcement do you want to have on the right guardrails on privacy enforcement.

The third piece is continually modifying and updating so that you have robust guardrails for safety and security. So as organizations have not only a process, but the technology to be able to handle AI governance, we end up seeing a flywheel effect of

more AI that is actually built and infused into applications, which then yields a better, more engaging, innovative set of capabilities within these companies. Visit IBM.com to learn how to define your AI data strategy. Custom content from WSJ is a unit of the Wall Street Journal Advertising Department. The Wall Street Journal News Organization was not involved in the creation of this content.