Tesla's robotaxi is intended to compete with Uber and Lyft

• Tesla is expected to unveil a new service at its Robotaxi event that will impact Uber and Lyft.
• Tesla could offer incentives to drivers and reduce their costs, which would challenge Uber's market share.
• Analysts see Tesla's entry as a potential long-term threat to the ride-hailing giant, but also as an opportunity for a partnership.

Elon Musk's highly anticipated Robotaxi Day is finally happening in Hollywood on Thursday night — and it has the potential to shake up the ride-hailing industry.

Musk has been touting Tesla's “Full Self-Driving” software and its potential to build a robotaxi network for years, and analysts told Business Insider that its emergence in the ride-hailing industry could pose a long-term threat to Uber and Lyft. It could also force them to develop and expand their own autonomous vehicle offerings or seek a partnership with Musk's company, similar to Uber's partnership with Alphabet-owned Waymo.

Tesla's event is expected to provide a look at both a new autonomous vehicle, the rumored Robotaxi, and an accompanying ride-hailing network.

Tesla released a teaser in June of what the app for the ride-hailing platform would look like. The concept calls for Tesla to use its network of owners to build a fleet of autonomous robot taxis that can be accessed via an app. Musk has suggested that Tesla owners who participate could earn up to $30,000 a year.

A competitive threat to Uber, Waymo and Lyft

Tesla's entry into the ride-hailing market will be a significant development for both Elon Musk's electric car company and the currently dominant players.

Investors in Lyft and Uber were “significantly concerned” as they prepared for the event, said Ken Gawrelski, an analyst at Wells Fargo, who rates Tesla an underweight, Uber an overweight and Lyft the same weight.

Gawrelski said that Tesla will likely offer a cheaper service than Waymo and that Tesla also has “a cost advantage per trip and per mile.” Gawrelski has the same weight rating for Waymo's parent company Alphabet.

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Analysts at Morgan Stanley predicted earlier this month that Tesla would likely offer a discounted or free FSD software update to drivers using the ride-hailing service, along with a lower acceptance rate for drivers to encourage faster adoption.

The ride-hailing industry has been dominated by two big players – Uber and Lyft – and Gawrelski said Tesla's robotaxi could be a new challenger fighting for market share. However, he said the long-term structure of the industry is really at stake.

The question then becomes how long it will take Tesla to actually launch such a service, with Musk known for teasing upcoming products that are months or even years away. Musk said during Tesla's second-quarter earnings call in July that he would be “shocked” if the first robotaxi ride wasn't possible next year. But he also acknowledged that he had been optimistic about timelines in the past.

Shweta Khajuria, an analyst at Wolfe Research who has an Outperform Buy rating on Uber, Lyft and Alphabet, told BI that she believes Tesla is still a few years away from full autonomy.

“Ultimately, robotaxis could pose a bigger threat if Tesla deploys them commercially on the road, but Tesla is still a few years away from full autonomy,” Khajuria said.

“Nevertheless, our analysis suggests that even in the worst-case scenario (which is arguably a low-probability event), Uber's profits translate into a high single- to low-double-digit loss when the vast majority of autonomous driving “We have a partnership (like Uber currently has with Waymo) and most of the autonomous market share comes at the expense of Uber losing share in AVs,” she added.

The more pressing concern at the moment is Tesla's launch of a new ride-hailing app. With millions of Tesla drivers on the road, the electric giant has an opportunity to expand its platform, she said.

“This could potentially put pricing pressure on Uber and Lyft, which would pose an increasing threat to Uber’s growth, particularly in the U.S.,” Khajuria said.

Uber, Lyft and Tesla did not immediately respond to a request for comment.

It may not be a “zero sum game.”

Wedbush analyst Dan Ives, who has a “buy” rating on Tesla with a $300 price target, said this is “not a zero-sum game.”

“I don’t see it as a negative for Uber and Lyft,” Ives said. “I could argue that it is positive as autonomous driving and FSD Uber would openly benefit from a Waymo partnership.”

Ives said Tesla's robotaxi event will be a historic day for the auto industry – and will put pressure on Uber to pursue further partnerships.

Uber has already taken steps to expand its autonomous vehicle offerings, recently announcing partnerships with Waymo and GM Cruise. In September, Waymo announced that its Waymo One ride-hailing service would be available exclusively through the Uber app to users in Austin and Atlanta. According to Waymo, the service offers over 100,000 rides weekly in San Francisco, Phoenix and Los Angeles.

Uber boss Dara Khosrowshahi had also previously expressed interest in a possible partnership with Tesla.

“I don’t think it’s a zero-sum world,” Uber’s CEO said during a podcast interview in August.

“If you look at groceries, for example, there's McDonald's, Starbucks, Domino's – every single major player out there has a direct channel to consumers,” Khosrowshahi said. “But as they try to maximize occupancy of their restaurants, etc., they have come to the conclusion that they should partner with marketplaces. I think the same will apply to cars.”