Tesla’s Public FSD Beta Is A Huge Mistake

Advertisement

One of the biggest parts of the long-term bull case for Tesla (NASDAQ:TSLA) is autonomous vehicle technology. Tesla stock investors are understandably excited about the recently launched limited public beta test of its Full Self-Driving (FSD) software.

A black Tesla (TSLA) Model S is parked between rows of charging stations.
Source: Grisha Bruev / Shutterstock.com

Regardless of what FSD is (or isn’t) today, I believe Tesla is making a stupid, dangerous, and potentially very costly mistake in its approach to its AV rollout. If Tesla doesn’t realize this mistake, the company could do irreparable harm to its brand in coming months.

Tesla Stock Is Not The Best AV Play

First of all, I believe AV technology is a massive long-term investment opportunity. But for investors looking to profit off of the driverless vehicle revolution, Tesla stock is maybe the third best option.

The first company to be granted regulatory approval to offer fully driverless services to the public was Alphabet (NASDAQ:GOOGL) subsidiary Waymo in October. Waymo One users sit in the back seat of the car with no driver in the front seat at all.

Tesla has made very clear that FSD beta testers should be prepared to take control of the vehicle at any moment because the software “may do the wrong thing at the worst time.” Maybe Tesla has its “Full Self-Driving” brand, but FSD is far from full self-driving. Waymo’s service is actually fully self-driving.

Consumer Reports recently named General Motors (NYSE:GM) and its Super Cruise active driver assist program the market leader in AV technology products available to the public. Waymo’s software is a service, not a product that customers can actually buy and use. The Consumer Reports ranking did not include the latest Tesla FSD software update. However, Consumer Reports found all kinds of problems with Tesla’s Autopilot software a couple of months ago.  Given Consumer Reports ranked Autopilot a “distant second” behind Super Cruise prior to the new update, I doubt Tesla closed that gap with its FDS update.

What Is Tesla Thinking?

For the sake of argument, forget that Waymo rides are actually driverless. Forget that Autopilot is a “distant second” to Super Cruise. Just assume for a minute that Tesla, GM and Waymo all have AV software that is roughly equal in terms of performance.

Bringing fully autonomous vehicles to public roads across the US should be a long, slow process. Public roads are extremely dangerous, and people’s lives are at risk any time they get into a car. Earlier this year, Partners for Automated Vehicle Education (PAVE) found that nearly half (48%) of Americans said they would not get into a self-driving vehicle. One in five people said they don’t believe AVs will ever be safe.

Waymo and GM are taking an extremely careful approach to rolling out their software. Waymo has been testing its technology in a relatively small region in the Phoenix area for about two years. Only after the company was 100% convinced that its tech can navigate those roads 100% safely 100% of the time did it release its service to the public. It is only available in a small, 50-mile radius to start with. The plan is to expand its services to larger areas over time. Once they are 100% safe.

GM is taking a similar approach in the San Francisco area. Start small, make sure it’s safe and then expand into new areas.

Tesla is taking a completely different approach by allowing a handful of customers to test its software on public roads anywhere they choose.

Major Brand Risk

There are already plenty of scary videos on social media of FSD screwing up turns, intersections and lane changes.  I’m not here to bash Tesla’s software. I’m certain GM and Waymo are having all the same issues. But the difference between Tesla and the other two companies is that GM and Waymo’s screw-ups are not all over the internet. Because their testers are not customers. They are trained employees.

I’m also certain that FSD gets it right most of the time. I’ve read countless glowing reports from drivers online. But just one video of FSD attempting to drive into oncoming traffic will get more views and shares than another 1,000 clips of it driving flawlessly down the road.

Elon Musk understands social media better than anyone. That’s why I believe Tesla has painted itself into a corner with its public FSD beta. By releasing the update to the public, Tesla has potentially created a public relations nightmare. Every missed stop sign, every wrong turn and every accident will be out there for the world to see. Even if FSD is making fewer mistakes than the Waymo or GM software, it won’t matter if nobody sees the other companies’ screw-ups.

How To Play It

Tesla stock is a cult stock with a valuation that detached from reality a long time ago, so I do not recommend traders buy or short the stock.

But I believe there is too much risk to Tesla’s brand if the company expands the FSD beta test to additional Tesla customers. Tesla can’t afford to get a reputation as the company with the “dangerous” AV technology. If Musk is as smart as people think he is, he will understand Tesla’s brand and his reputation are responsible for 80% or more of the Tesla stock valuation. Musk won’t put those precious assets at risk by expanding the FSD beta any time soon.

On the date of publication, Wayne Duggan held long positions in GM and GOOGL.

Wayne Duggan has been a U.S. News & World Report Investing contributor since 2016 and is a staff writer at Benzinga, where he has written more than 7,000 articles. He is the author of the book “Beating Wall Street With Common Sense,” which focuses on investing psychology and practical strategies to outperform the stock market.

Wayne Duggan has been a U.S. News & World Report Investing contributor since 2016 and is a staff writer at Benzinga, where he has written more than 7,000 articles. Mr. Duggan is the author of the book “Beating Wall Street With Common Sense,” which focuses on investing psychology and practical strategies to outperform the stock market.


Article printed from InvestorPlace Media, https://investorplace.com/2020/11/tesla-stock-public-fsd-beta-is-a-huge-mistake/.

©2024 InvestorPlace Media, LLC