Tesla Motors Inc Mobility Service to “Expand Across the US” in 2016

Tesla Motors Inc (NASDAQ:TSLA)

Tesla Motors Inc is rumored to be working on an Uber competitor that will, in the eyes of Morgan Stanley’s Adam Jonas at least, shake the foundations of the auto world. Elon Musk, the firm’s visionary CEO, had better watch out however, as a 16 year old from Playa Vista, California just might get there first. Haydn Sonnad is the founder and leader of Tesloop, a firm that aims to make travel in a Tesla Motors Model S open to everyone.

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Since earlier this year Tesloop has been operating on a single route: Las Vegas to Los Angeles and back. The firm charges $85 for a single trip and aims to compete with regional airlines on price, luxury and convenience. That plan appears to be working. Haydn, who takes the title Chief Evangelism Officer, says that the real limit is the number of cars that he can get his hands on.

The Model S is immobile, that’s the first problem

While the rest of the world, and Mr. Jonas of Morgan Stanley, waits for Tesla Motors to emerge and make Tesla Motors Mobility a reality, Mr. Sonnad, along with his father and other backers, is making a Tesla sharing service a reality. The problem that Haydn saw is the same that Mr. Jonas recognizes. Teslas are amazing cars, but they’re just not used enough.

The average Tesla Motors Model S sits in a driveway or on the street for twenty or more hours per day. That’s not great when the cars are so much better for the environment than almost anything else on the road. Haydn says that the goal of Tesloop “is maximum utilization of the vehicles.”

Rahul Sonnad, Tesloop’s President and Haydn’s father, takes it one step further. He says that the firm wants to “fully utilize these vehicles, thus realizing the maximum environmental benefit of each car – which is over 10x the normal benefit of standard usage of a couple hours a day.  At the same time this would give thousands and thousands of people their first chance to experience the amazing benefits of electric/autonomous transit.”

Rahul reckons that using a Model S at max capacity can save about 40 tons of carbon each month. Expand that to something like mass transit, and you’re keeping a while lot of carbon out of the atmosphere.

Tesloop offers something different

The service that Tesloop offers is based more around the Model S than anything else. Haydn describes the experience as “closer to a regional airline.” When you book on Tesloop.com or through the firm’s Android app (Haydn promises that an iOS app is coming soon), you get to pick your seat. Right now the seats are all priced the same, but that might change once the Tesla Motors Model X, with its back seats, arrives.

That’s not the only way in which the experience mimics that of an airline. Journeys follow a strict schedule, and there are fixed departure points.  You won’t, of course, have to pass through the TSA to use the Tesloop, and the firm offers all sorts of luxuries that could make the experience a whole lot better than that on an airplane.

There’s snacks, and wifi and noise cancelling headphones on offer. There’s also “a concierge who is remotely available by text to help with anything, and who also comes on the video and car audio system within the car to give you an orientation.”

Tesloop now runs between two and four trips between Las Vegas and Southern California each day, but if it can figure out some key parts of the equation, like keeping driver costs low and getting more units of the Tesla Motors Model S in its stable, Haydn is sure that expansion will come quick.

Getting driver costs to zero

What really makes the business exciting, according to Haydn, is Autopilot. He reckons that it’s “the most exciting thing in the entire technology space now,” and it’s going to have major ramifications at Tesloop. A question about Autopilot is actually what gave Tesloop its first major media coverage this year.

The project first came to light when Haydn stood up at Tesla Motors’ shareholder meeting in June and asked Elon Musk directly what he thought of the idea. Here’s a look at that exchange:

All of the Model S units used by Tesloop are equipped with the hardware and software necessary to run autopilot, but the firm is taking a gradual approach to getting the driver cost down to zero. Right now, says Haydn, about “98% by miles” of the route is being driven by the Tesla Motors autopilot system.

That reduces the need for a certain amount of driver specialization, and opens up a new business model. Next week the firm is starting a “Pilot’s Club” program that will allow users to qualify as drivers and book the driver’s seat. “They will be able to travel for no cost,” says Haydn, and in exchange “they need to stick to our routes and our timeline, and act as a brand ambassador for sustainable travel and its benefits.”

It’s a major opportunity for those that love Tesla Motors Inc , and need to get to Las Vegas, to drive a Model S and make the journey for free. Autopilot is “one of the foundations of the business,” says Haydn, “we think that our driving costs will trend towards zero over time, and that starts now.”

Competing with Tesla Motors

Haydn seems to be drawing up an empire, with plans to “expand across the US next year and globally where superchargers are located.”  That expansion will begin next week, with the firm’s second route, between Southern California and Phoenix. That sort of growth from such a young company can’t come without challenges, however.

Rahul says that the expansion is still in the works and the firm is trying to figure out exactly how it’s going to get the cars it needs. Tesloop may have an alternative to spending millions on buying a Tesla Motors Model S for each new route it opens.

“If they are leased, the upfront capital requirements should be quite low,” he says. The firm is also “considering models for current owners to lend their cars to us,” but Rahul reckons it’s safe to say “we would not expand in a way where drivers are managing things (ala Uber), as we are debundling the driver and the car.”

While thinking about its own expansion, Tesloop is directly building in what some, including the Tesloop team, think will be a major Tesla Motors segment in the years to come.

Haydn expects to see something “super-amazing” from Tesla Motors on the mobility front. Competing with Tesla Motors Inc  while relying on both the firm’s cars and its Supercharger network is all in the Tesloop business model.

Right now the firm even gets free electricity from Tesla Motors, courtesy of the charging network, to fuel its cars. Haydn doesn’t think that’s much of a big deal: “Since our routes are only long distance, we feel this adheres to the letter and spirit of Tesla’s policies. At this point they have no restrictions on super charger use for commercial purposes.”

Given the unique advantages of the Model S, however, he reckons that even if Tesla Motors changes those rules it won’t hurt his plans. “At some point Tesla may decide they want to charge for supercharging in various scenarios,” he says, “that’s fine for us. The big win here is the cost of electricity vs. gas which saves 80% – 90% of the cost.”

Tesloop is a business built in and around the Tesla Motors Model S. It’s a byproduct of the incredible feat that Elon Musk and his team have managed with their EV project and it’s a clear example of the way things are going in the future. ‘Utilization’ is going to be the key concept in the automotive world in the coming years and Haydn Sonnad is ahead of the curve.

He doesn’t think that Tesla Motors is going to be a major risk to his business, even if Elon Musk does go ahead and launch his own service. “This market is going to be big. Like trillion dollar big,” he says “So there is room for a lot of car services, and in the long distance shared route space, we plan to be the leaders.”

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