The Autonomous Driving Race Is Already Over w/ Kyle Reidhead

Just so you guys understand, Tesla is let's say 90% of this. Tesla today generates $30 billion in revenue. We are saying by 2027 there's $40 billion of revenue coming from robo taxis at a conservative pace, and Tesla takes most of that.

Listen, Tesla is one of the most valuable companies ever. And yet their price to earnings ratio is 300, which would make you think that it is overvalued. But once you peel back the layers, there is so much more to this company that has not only happened so far, but coming in the future when it comes to space, robo taxis, and robotics.

Today, I am joined by Kyle Reedhead, our co-founder at Milkro, to dive into the realistic timelines for fully self-driving cars that are going to largely come from Tesla. Why Tesla is going to be insanely dominant in that space, if not already, and how they're just going to shoe away competitors like Uber and Whimo out. They're going to incorporate robotics when they eventually get there. And of course how Tesla merges maybe eventually with SpaceX and XAI and the trajectory for those two companies.

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Kyle, we actually have not done a show together on the AI channel, so it's good to be back together for this episode. You are a huge Tesla nut. You've got your new Tesla that you've been self-driving around for the last couple days and I feel like you've got a lot to tell us about what's going on with the company and their earnings that they just reported. Please take me through it.

Yeah, I guess first I want to set the stage for what Tesla specifically is becoming because I think a lot of people don't understand it. What's interesting is the reason why I say that is as you just alluded to, I now own a Tesla. I got one about 3 weeks ago.

I use fully self-driving. It just drove me from London, Ontario, Canada to Florida, South Florida, so over 2,000 km. It was 2 days worth of driving. It was one of the best experiences I've ever had traveling because you actually don't pay attention to traffic or anything. It just drives for you.

And I put out a post about it and Tesla actually retweeted it. So, it went quite viral and what was interesting is I got to read the comments of everyone and everyone was basically complaining about that it's EV and like what about charging and all this kind of stuff. And so it's funny because I think the world still sees Tesla as a car manufacturer for EVs and Elon is way past that and the cars themselves the product itself is already way past that but most people don't see it as this yet.

So the thing to understand about Tesla is it's not a car company at all. It's an AI company. It's an autonomous company, autonomous robots company. And cars just happen to be one of the devices it's using to put the AI brain that it has into.

Right now, that happens to be a massive industry. There's, I don't know, hundreds of millions of cars around the world. Everyone drives a car and needs it for certain things. So, it's a massive industry to tackle, but the problem is everyone's still stuck on Tesla being this like EV company, and there's a lot of competition in the EV space now.

Tesla was the first EV company to really do a good job here and go all full on EV. It took a long time for people to even understand that. And now there's tons of competition. So everyone thinks, okay, Tesla's got competition from BYD or whatever's going on in China. And you know, every car company is trying to do this now.

And they're missing the point that Tesla's way past that now. And it's just AI. It's just fully self-driving. And cars is one way that's doing it. The next device that it will be is in humanoid robots.

And the earnings and the reason why I say this context is the earnings really showed this because forgetting some of the numbers of earnings now they did well you know they did they you know I think they made like 25 billion in revenue and all this kind of stuff but forget that for a second the key thing that came from this was one they finally started reporting how many people are using fully self-driving which is more than doubled from the year previous and the reason for this is because version 14 came out I don't know maybe 6 months ago or something and that was the version where they finally solved FSD.

So Elon literally says, and Tesla talks about this a lot, which is FSD is solved. There's just like little tiny edge cases like how does the car work in like I don't know going through a car wash, right? That's a very weird thing for an AI to figure out and how you kind of program that. So there's like little edge cases it has to figure out and then it's mainly just regulatory concerns.

So the regulars don't really let you just like not pay attention while the car is driving itself. That's a new thing that we have to kind of figure out. So, they've at this point they've solved it. And during the earnings call, Elon said, "Hey, we're shutting down the Model X. We're shutting down the Model S, which is sort of like their higherend SUV, their higherend car."

And instead, we're going to turn those factories into factories for humanoid robots. And basically, what's happening is the company is now pivoting fully into into AI in autonomous devices, let's call or autonomous robotics. And so basically what their their thesis is here and this is very helpful for the listeners to understand of why what Tesla's building is such a big deal is the world is about to change in terms of how we use vehicles and how we we as humans do labor slash employ labor.

So right now it's very common for everyone to have every family to have two cars generally right and what Tesla is is kind of pivoting towards is no one will have two cars anymore. You might have one car, you might have no cars. Why is that?

Well, when a car can drive itself and doesn't need a a driver, what Tesla's really doing is actually going to compete with Uber. It's not really competing with like GM and Ford and whatever anymore, it's actually about to compete with Uber because it's launching its robo taxi network.

Okay, so this is cars that are made specifically to go out and just drive people around all day every day. These cars don't have steering wheels, they don't have pedals, they don't have brakes, they don't even have a back seat because most Ubers is just two people or one person. And so it's designed specifically for that.

So, they're going to compete with Uber. And then what's interesting is as a Tesla owner, I can click a button, and this isn't true yet, but it will be soon, and my car can go also be an Uber on its own while I'm working or sleeping or doing whatever. So, this this flips the car industry on its head.

One, you don't need as many cars anymore because Ubers become or Ubers, I say in brackets, robo taxis, become 10x cheaper is the estimations. So, I think the the estimation is around like 25 cents per mile maybe. I forget what it is, but it's 10x cheaper than what an Uber is today, which means generally there's if you want to go across the city, you don't want to take an Uber because it's too expensive.

Well, now it becomes very very cheap and way cheaper to do it. So much so that you might not even want to buy a car because it makes sense to go to work every day in a robo taxi instead, because it doesn't need gas, it doesn't need a human driver, all this kind of stuff. So, the way we think about vehicles is changing.

And then there's two other big things that that they announced that are coming this year as well that have to do with the same sort of pivot of why they're going, hey, we'll build less customizable cars. We'll just focus on the robo taxi and the cars that sell, which is the Model Y and the Model 3. These are kind of like cheaper cars.

Which by the way, just before I I move on to the next thing, I got a Model Y. Canadian dollars it was like 65,000. Okay, so I think in US dollars maybe like 45,000 or less. So it competes with any typical SUV.

But once I can click a button and allow my car to go and be an Uber, that car while I'm working or sleeping will generate me what we estimate to be 60 to 70 to 80,000 plus a year. So what does that do to cars which currently depreciate, but now if I can buy a car and in year one make my money back, that's a game changer for how cars are going to function.

So I just want to plug that in there. The other two things that he's really focused on scaling and why he shut down the model X and the model S is because they have semis launching so transport trucks that are launching this year in production and then they are also launching uh humanoid rob humanoid robots in production as well along with robo taxis.

So everything moving forward is cars that will drive themselves at scale and will make a big impact either on the human transportation or transportation for products and goods which is the semis and then of course humanoid robots which will come down the road which matters for I mean everything every type of labor whether it's in factories or or or anything else.

So that was the big pivot that they announced and why that earnings call was so important. I'll stop there. We can get into numbers we can get into different things but I just want to see if you have any questions on that first LG.

Well, how did the market react to all this? That's kind of what I've been curious because a lot of strange stuff is happening in the market on a broader scale, right? Tesla's part of the Mag 7. There's all these different narratives going around, but I want to know from you like how how did the market see this earnings call and and especially the announcement that they were going to be sunsetting two two of their models to pivot into robotics.

So, first of all, those two models they only sold about like 15,000 of them a year. So, it it's kind of it's super relevant versus like they sell 1.6 million cars a year or sorry, a quarter. And actually, let me just get those numbers actually correct here. 1.6 a year, sorry. So like these cars like the the Model X and the Model S, they're they're sort of irrelevant.

They're more like high-end if you really want a nice sedan or you want a really big whatever. And so again, becomes less relevant when you have self-driving vehicles and you don't necessarily need this many cars. So that wasn't a big issue. The market liked it.

The only problem is it got caught up at around the same time that just there's a riskoff environment. And so everything went down essentially over the last couple weeks. But overall when the when the earnings call was done and the the report came out, the market really liked it.

The only thing that is a little bit iffy about Tesla is that they will increase their capex. So they're going to spend about 20 something billion in 2026, which was not expected, but the market actually kind of shrugged that off. It's interesting. Both Amazon and Google announced that they were going to double their capex for 2026. The market hated it. Amazon was down 15% in a day. Google was down.

But the market actually didn't mind Tesla, I think, because the margins for what they're about to do are so different from anything a car company's ever had, right? So, the margins they have on on cars, one is better than any other car company that exists. But once they have FSD, because you have to pay a subscription to have this, their margins get even better cuz that's basically 100% margin close to.

And the robo taxis are a margin that you've never seen in a car before. So I think the fact that they're pivoting to those higher like better margin products, the market really really liked that and I think is beginning to understand what's happening here. So the market liked it overall.

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What's going on with the competitors for the robo taxis? Because you mentioned Uber. Martin on our Pro Research team has brought up Uber a few times internally as something that some people are kind of mentioning that they they kind of like. I feel like you've got a contrarian view and also add some context to that. Uh, Whimo is also a competitor there, but there was a rumor last week that some of their FSD was not real.

Kyle, is this is this like a is this totally done? Like is Tesla just going to dominate this once they actually get into it and they get approved?

Yeah. So, the the big thing to understand is in in terms of FSD, they don't really have any competition. So there there's there's competition in EVs, which is what everyone again mistakes Tesla for, that they're an EV car manufacturer. They are not that. They are they're an AI product. They just happen to come with a car.

Like I I say all the time, I bought FSD and it came with a free car. Pretty cool, huh? Like that's the way that I explained the purchase that I made. And I think that's how people will think about buying their like once your car becomes smart, why would you buy a non-smart car, right? It's like once you bought a smartphone, you never went back to a nonsmartphone, right? That would be insane, right? You don't go back to buying a Nokia Flip.

So, that that's the direction here in terms of competition on the smart car side of things. Whimo is basically the only one and there's one in China called I think it's like Badu or Badau or something like that. The issue, so Whimo has pretty good FSD. It already has like robo taxis driving around Austin and a few other towns. It actually has more than Tesla does. So, it's actually ahead in that.

The issue though is that the way that Whimo works is they have built a bunch of devices that go on top of existing cars, but it costs about $150,000 to retrofit an existing car. Can be any car, BMW, Ford, whatever. They'll put this thing on, it looks ridiculous. It costs about $150,000 and then it works.

But it only works in geoenced locations because it only knows the rules that have been programmed into it. It's called LAR systems. So it's it kind of teaches the rules rather than what Tesla's done which is like an AI neural network that's like learning as it goes and it learns from all the different cars. So the problem with Whimo is it can't scale right because it costs too much and they don't own any cars.

So is it a competitor? Not yet. There is some potential speculation that Google might and Google owns Whimo by the way. Google might buy a car manufacturer, right? There's a lot of car companies not doing so hot right now. It could go buy one of them. I don't know GM or Ford or whoever, right? probably a smaller company. It could just buy them.

That means now it owns the the manufacturing like the factories that build these cars and it can just like auto put within the the lighter systems that it has the Whimo self-driving systems and then it might be able to do that. But that's many years away.

The next one is Uber. Again, they have the the they own the network around like the customers that use Uber, right? They own that for sure. The problem is again they don't own any cars, okay? and they don't own any fully self-driving data or like AI for that. So, could they just tell all their drivers to become fully self-driving? Like, sure, but none of their cars can do that, right?

And so they don't really have a lag here. Now, Uber is trying to partner with I think BYD which is the largest EV manufacturer in in China. So, there's somehow maybe they can do something there. BYD is building FSD, but they just don't have anything remotely close to what Tesla has created. So, they're very very far behind.

So the thing to understand about FSD is in order to get a car to actually drive like from Canada to South United States, it has to be you have to have so much data. And not only do you have to have so much data and and by data I mean driving miles. So a car that has all the neural networks and the sensors, it has to drive around for forever and and compile all that data in one spot.

Then it has to process that data, make sense of it, and then go and action it in the car. That's very very very difficult to do. Takes years to get that data. takes millions of vehicles to get that data. Again, what did I just say about Whimo and Uber? They don't have either of those things.

So, they don't have the data or the ability to get the data just yet. Then, they also don't have Google has the ability to process that data. Uber does not, right? Because Google is a hyperscaler, so they have data centers. They can do all that stuff. Uber cannot yet. So, neither of them have something that makes like any sense yet to compete with what Tesla has cuz Tesla has I think today it has 8 million cars driving on the road.

Now, not all of them are driverless or using FSD. Only 1 million of them are using FSD, but every car that's driving is collecting the data they need. And then it has Grock and and everything it's doing with XAI, right? It has its massive data centers that it's already built out to power those. So it has the infrastructure to not just take the data from their 8 million cars but also to process it.

And so that is their moat right the mode is not that they have oh and then they also have the ability to scale production of cars with the the sensors and everything in them. So right now there's no one even remotely close to competing with Tesla on the robo taxi and self-driving car world which is why it makes me so bullish on what Tesla has because everyone is is years away from this.

How did this happen? Is this just like an Elon driven thing to just be so far ahead of the competition and to just think about it differently? Like I'm trying to understand. He got so far ahead of the car companies, now he's getting far ahead of the taxi companies. He's getting he's ahead of the with Optimus. We'll talk about that in a minute. He's ahead of the robotics companies. What's the strategy to do that? Like is it just unlimited capex and just keep spending all the profit? Like what what do they do to do this?

So most people hate Elon Musk, but he's probably the smartest person on planet Earth right now. And so whether you like him and you like who he is and what he says, to me it's completely irrelevant. Like even in my comments that I had, I said I had that post go viral and so many people were like, "Yeah, I think the Teslas are great, but I don't like Elon, so I won't buy it." I'm like, "That just is so makes zero sense." So I think one, people need to put their biases aside. Elon is incredibly smart, the smartest we have on planet Earth.

So he's so far ahead of everyone. Like we are sitting here talking about FSD and and people are just learning about how cars can drive themselves. He's already thinking about how we can build like um power plants and data centers in space and then bring humanoid robots up there to work on them and then have Teslas drive around like Mars to build a city. You know what I mean? Like a self-sustainable city like so we can be multiplan like he's so far ahead of everyone else.

So he also made the main thing that he did right was one they figured out how to basically build these cars completely inhouse. So they they almost use no other companies to manufacture the car. No other car company does this. So that's why they can produce cars faster than anyone else.

Two, they also own, as I said, the data and the the processing of that data that's all inhouse as well, right? And he was building towards that kind of thing with XAI previous. So his his other companies are allowing it to kind of compound into the things that he's doing within Tesla right now. So that is a huge reason why he was so far ahead.

He was already learning about AI from XAI and he goes, "Oh, well, if XAI is just going to be this neural network, why don't I just apply that to a car?" So I think it was 2018 or 2019 where he said LA liar is It's not going to work. We have to use neural networks. So he was you know this was seven or eight years ago they started doing that.

Whereas every other car company like Whimo that was thinking about even trying fully self-driving they were just starting to plug in LAR and he had already decided LAR was never going to work if we're going to do this right and so it has to be this. So he's just many many many years ahead of everyone else on any of this kind of stuff. you know, he had already figured out EV before most car companies thought that EV would even be a thing.

You know, he's already figured out FSD. And again, almost no car companies worry about FSD yet. And that's going to be such a big misb. He's going to completely crush the car industry in my opinion.

Well, we do want to chat about SpaceX and XAI and how all these companies kind of come together. But first, give me kind of like a bit of a timeline of what happens next with Tesla, right? because maybe start off on when you think FSD actually gets fully approved and when this part comes to pass, right, that you're saying that your car will go pick other people up while you're sleeping and all this this stuff. Um, and even just what the next couple quarters look like for them.

Yeah. So, these timelines are very crucial because again, FSD is the only thing that matters for Tesla. If this happens, if they get and and it's right now it's supervised FSD, meaning I have to sit in the driver's seat. I have to be looking forward and if I look away for something like five or six seconds, it starts beeping at me and says, "Hey, pay attention. Pay attention."

Now, there are ways around it. You can put your phone on the other side of the steering wheel and you can send emails and text all day. I just did it for, you know, two days straight. But ultimately, you do have to be paying attention and I have to be in the driver's seat. What's coming soon is unsupervised fully self-driving.

And this is where I can sleep while I'm in the car. This is where I can do a podcast like this, which I hope to do one day with you, LG. This is where you don't even have to be in the driver's seat, right? That unsupervised FSD is the unlock for Tesla to really go to a whole another universe and really separate itself from the rest of the pack because not only will they have unsupervised, but they can also do it at scale.

They can make a uh, you know, I think close to their factory right now can make about a million robo taxis. They're not doing it yet, but they could and they can make more than that for Model Y and and and Model 3s. So, that's the key thing. And I think what's supposed to happen is that's coming in certain states or certain cities in Q2 of this year. So we're a few months away. Austin will be one of them. California will be one of them. Potentially Florida will be one of them. And then there's a few other states.

Now this will not get federal and this will not go across all the US. It will not go global. It'll be state by state. And so this really depends on regulation. But I think what's going to happen, at least what I hope happens is Q2, hopefully it goes live. They're going to start production of the robo taxis at scale. It'll be slow and steady, but it'll work its way up.

And if they can do it in Texas, for example, in California, and they can prove that it's, you know, 10x cheaper than an Uber, and it's 10x safer than a human driver, which right now it's I think the last time they put out the results, it's eight times safer, fully self-driving, than a human driver. I'm telling you right now, this morning, I I actually drove the Tesla for once when we had to go to a quick meeting down the street.

I was like, you know, I'm going to drive it. My wife, she's just like, "You know what? I prefer when the car drives itself. It's way safer. So, uh it's it's very very noticeable on on how much safer to say. So, once you have those two things, what you're going to have is people pushing to get this. Hey, I need robo taxes here because it's cheaper for me to get around New York City, cheaper me to get around, you know, Alabama, you name it. And they'll start to push against the regulators.

And hopefully that will start to push us forward to have unsupervised FSD farther along and and and get approvals in different cities in different countries. If and when that happens, that's when Tesla really goes through the roof because for two reasons. One, they get approval, they'll start ramping up production of robo taxis. Okay, that'll take a while. So, there's only going to be, you know, maybe a few thousand in the first quarter and then a few thousand more in the next quarter, and it'll take a couple years to get to actually making millions a year in in the factories.

But the interesting thing about what Tesla has that no other company has is they already have 8 million cars on the road today that have the technology to be a robo taxi. So at any moment once there is approval. So let's say Q2 there's approval from Texas saying hey we now have unsupervised FSD. You can have these robo taxes at scale. Tesla literally goes okay clicks a button turns it on and every single Tesla that exists in Texas can click a button and their car can go work for them.

I don't think people realize what that's going to change for this world. The moment I put out a tweet and say, "I just made $50,000 in the last two quarters or whatever on my Tesla. I can't believe you guys buy another car." These these cars are just going to sell like absolute crazy and every other car company's going to be like, "Damn, we completely missed this." So, I'm assuming or hoping that that happens this year.

And then actually, I can show you guys some we actually made some projections here on what this could look like. So, I'll just I'll just share my screen here and kind of walk you through what I have up here is our projections for robo taxis from 2026 to 2030. 2023, 2024, 2025 are our actuals. So, you can see they're quite small. We have currently have 7,000 robo taxis in existence in at the end of 2025.

Our estimation is we get about 75,000 in 2026, then 600,000 in 2027, 100 and I know this is it's a chart that we just made with Gemini, so this is not nicely designed just yet for those that are watching. But we get up to 1.5 million in 2028, 3.15 million in 2029, and 6.2 million in 2030.

Now, the key thing to look at here is the dark blue of these charts for those that are watching. This is the manufactured robo taxis. It's a bit slower because it takes a while to to manufacturies. And by the way, this is not just Teslas. This is including Whimo, everything. But Tesla's probably about like 90 95% of this, if not more.

The light blue is the existing fleet of taxi or of Teslas that exist that can just all of a sudden get added in. Now, 100% of the existing Teslas won't go and do this, right? Some people are just going to want to own their car and not have others sit in it. So we we have predictions on what that might be which is somewhere around 20% opt-in rate. It might be way higher than that. Who knows?

So I think in the and this is this is probably a cons very conservative I would say. But so really what what happens here is of the value that comes from this meaning people paying for robo taxi services whether it's for manufactured robo taxis or a car like mine that can just put out there. There's about $320 billion of revenue that that will come from that annual revenue.

Just so you guys understand and Tesla is let's say 90% of this. Tesla today generates $30 billion in revenue. We are saying by 2027 there's $40 billion of revenue coming for robo taxis at a conservative pace and Tesla takes most of that. By 2030 it's 320 billion. That's a 10x on Tesla's existing revenue.

And this does not count the membership or the subscription that's needed for fully self-driving. This does not count the sales of the cars. This does not count anything to do with their other products like humanoid robots or semis or their energy products, any of that. This is a revenue stream that doesn't even exist in Tesla right now. And we think it's going to 10x their the entire company's revenues just from this one product.

So, the the potential here and the reason why Tesla is priced at the way it is, I think its PE ratio is something like I don't know 280 or something ridiculous is because this can come and this doesn't count the biggest product in the world coming to Earth, which is humanoid robots. So, it's very hard to to not be bullish on this company.

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What What is Tesla going to incentivize people to do given these projections of robo taxis? You're telling me that basically, you know, all these these 8 million Teslas on the road right now will they'll be able to switch a button and they have FSD once that's approved, which is great. So Tesla's also going to make separate robo taxis that they themselves deploy for you to get in and out of kind of like an Uber just without the driver part. So how do they balance those two? Right. I'm just saying it's like if I'm if in 2 years I want to be a driven around by a Tesla, are they going to want me to buy my own Tesla or are they going to want me to just subscribe to the service?

Subscribe. You're just going to use the robo taxi network and it'll consist of a combination of actual robo taxis and human-owned cars that will get added to the fleet. I think Elon's guess is over time there'll be a lot more robo taxis and there will be people owning cars, but in the near future if you can make money.

So, what they're suggesting is I think they're going to of the revenue they make from people who own their own cars, they will pay out 70 to 75% of that and they will keep 25 to 30% of that, right? So, it's