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Musk promised Bay Area robotaxis but Tesla's service does

not

involve autonomous vehicles

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Alarmed regulators pressed Tesla for answers and asked it

to

clear up 'public confusion'

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Musk's robotaxi promises underpin Tesla's $1 trillion

valuation

and Musk's enormous proposed pay package

By Chris Kirkham

Sept 22 (Reuters) - Tesla CEO Elon Musk

tantalized investors in July with a robotaxi update: After a

small-scale test in Austin, Texas, Tesla would rapidly expand

driverless cabs to markets including the San Francisco Bay Area,

where it was "getting the regulatory permission to launch."

Musk posted on X earlier that month that Tesla would deploy

robotaxis there "probably in a month or two."

The reality of Tesla's San Francisco plans did not include

driverless taxis at all. The automaker had not applied for the

needed permits, a process that can take years of testing under

state oversight. Instead, it planned pre-arranged trips in

human-driven vehicles only for riders who received an

invitation. And it would do this under a permit that is

typically used for limousines and does not allow on-demand

ride-hailing, according to state officials.

News of Tesla's robotaxi plans surprised and alarmed

regulators, according to emails among California and federal

officials and a Tesla public-policy staffer, which Reuters

obtained through a public-records request. After a media report

that Tesla would deploy Bay Area robotaxis in late July, a

senior state transportation official asked the Tesla employee

whether the company would clear up the "public confusion."

The staffer did not directly respond, saying only that Tesla

does not answer media inquiries and that customers would receive

information when available. The following month, Musk posted on

X that the "Tesla Robotaxi service area is already larger than

any competitors in Austin and the Bay Area."

Musk and Tesla did not respond to requests for comment on

this story. A spokesperson for the California Public Utilities

Commission, which regulates autonomous ride-hailing, said Tesla

is required to "properly and accurately" describe its service

and ensure its communications "provide a clear distinction"

between its human-driven operations in California and autonomous

ride-hailing it offers elsewhere.

Tesla's still-unproven robotaxis underpin its $1 trillion-plus

stock-market value and the eye-popping compensation package

Tesla's board of directors has proposed for Musk, which offers

him potentially hundreds of billions of dollars in company stock

tied to performance targets. Musk has promised the imminent

arrival of robotaxis every year for a decade. So far, however,

the EV maker has launched only the small-scale Austin test, with

a limited number of riders and human safety monitors in the

front-passenger seat.

On the July earnings call, Musk said Tesla had made

"demonstrable progress" on autonomous driving "that a lot of

naysayers said we would not achieve."

"We've done what we said we were going to do," he said.

"Doesn't mean we're always on time, but we get it done. And our

naysayers are sitting there with egg on their face."

Now Musk's promises are getting bigger as the billionaire

CEO faces a November shareholder vote on his compensation and

increased pressure to deliver robotaxis as Tesla's

electric-vehicle business declines. Musk told investors in July

that robotaxis would expand at a "hyper-exponential rate,"

serving "half the population of the U.S." by year-end.

Meanwhile, as with the Bay Area episode, Musk and Tesla are

increasingly using "robotaxi" to mean something less than a

fully driverless cab. A September 13 post on the Tesla X account

conflated the term with the "Full Self-Driving" (FSD)

driver-assistance feature offered to customers, which requires

an attentive human driver.

"$99/mo to have your own supervised Robotaxi," the post

read, quoting the FSD subscription price.

Matthew Wansley, a professor at New York's Cardozo School of

Law who specializes in autonomous vehicles, said Musk's Bay-Area

claims show how Tesla wants all the benefits of marketing

"robotaxis" and "self-driving" to customers and investors but

none of the regulatory burden or legal risk of making the same

claims to the government.

"They don't want to tell regulators they have an

automated-driving system," he said, "because then they become

subject to a lot more regulations in a lot of states."

Tesla started its Austin service in June but has not opened

it to the general public. It has started switching the

passenger-seat safety monitors into the driver's seat on rides

that include highways, Tesla said on X.

Musk has said Tesla plans near-term expansions in Florida,

Nevada and Arizona, which like Texas have few regulatory

barriers to self-driving vehicles. Tesla secured a certificate

this month to test autonomous cars in Nevada, according to state

officials, who did not answer questions about whether Tesla has

submitted paperwork to operate robotaxis. Tesla on Friday

received permission from Arizona to test autonomous vehicles

with a safety driver but is still awaiting approval to test and

operate without drivers. Florida does not require specific

operating permits.

Dan Crowley, portfolio manager at Nightview Capital, a Tesla

investor, said it does not matter if Tesla hits every one of

Musk's notoriously optimistic timelines as long as it ultimately

delivers a transformational product. Still, he said, investors

could eventually lose patience.

"If we're at the same place in two years," he said, "I

wouldn't be ecstatic."

REGULATORS CAUGHT OFF-GUARD

News of Tesla's Bay Area robotaxi plans unsettled regulators

at the California State Transportation Agency and the National

Highway Traffic Safety Administration (NHTSA), according to the

emails exchanged on July 25, which were seen by Reuters.

"Did your team meet with Tesla and discuss this weekend

rollout?" wrote Kareem Habib, a NHTSA investigator, to

California officials. A state staffer responded that Tesla did

not have the required permits.

Emily Warren, a state deputy transportation secretary,

emailed the Tesla public-policy staffer and top officials at two

other state agencies overseeing autonomous vehicles, citing

concern over public misconceptions about Tesla's Bay Area plans.

Tesla policy employee Noelani Derrickson said in an email

reply that the company had informed the California Public

Utilities Commission that it planned rides for Tesla employees'

family and friends in non-autonomous vehicles.

Warren pressed Derrickson on how information about a

"robotaxi" service had reached the public and suggested it might

have stemmed from "a misinterpretation" of recent Tesla

statements to staff and the public. Warren asked: "Do you have

plans to publicly clarify the nature of Tesla's expanding Bay

Area operations to dispel the confusion?"

Tesla's Derrickson did not directly answer but said: "As a

general policy, Tesla does not respond to press inquiries,"

adding that customers would receive information about Tesla's

ride-hailing operations "when they become available."

Derrickson did not respond to requests for comment.