On Wednesday, October 23, Tesla CEO Elon Musk announced that the company plans to launch driverless ride-hailing services for the public in California and Texas next year, a bold assertion likely to encounter significant regulatory and technical challenges.

"We believe we'll be able to have driverless Teslas providing paid rides next year," Musk stated during Tesla's quarterly earnings call. He mentioned that Tesla currently offers an app-based ride-hailing service exclusively for employees in the San Francisco Bay Area.

This statement reinforces and expands on a promise Musk made at the unveiling of Tesla's robotaxi two weeks ago, where he anticipated rolling out "unsupervised" self-driving capabilities in select Tesla models by 2025. The absence of a concrete business plan for the robotaxi at that event led to a decline in Tesla's stock.

However, on Wednesday, Tesla regained some investor confidence by projecting a significant increase in vehicle sales for the upcoming year.

In California, the company will need to navigate a challenging process to secure the necessary permits to provide fully autonomous rides to paying customers. Alphabet's Waymo, which offers paid rides in autonomous vehicles in the Bay Area, Los Angeles, and Phoenix, spent years accumulating millions of miles in testing before receiving its first permit from the California Public Utilities Commission (CPUC), which oversees ride-hailing services.

The California Department of Motor Vehicles, responsible for regulating the testing and deployment of autonomous vehicles, informed Reuters that Tesla last reported using its autonomous vehicle testing permit in 2019, which requires a safety driver. The agency noted that Tesla has not applied for a permit to test without a driver.

Tesla did not respond to requests for comment.

Regarding the Bay Area ride-hailing service for employees, the CPUC clarified that Tesla does not require a permit, as employees are not classified as passengers.

At the robotaxi event on October 10, Musk introduced a two-seater, two-door "Cybercab" designed without a steering wheel or pedals, relying on cameras and artificial intelligence for navigation.

On Wednesday, Musk acknowledged the challenges in California, stating, "It's not something we totally control," but expressed confidence by adding, "I would be shocked if we don't get approval next year."

Texas has less stringent regulatory requirements for autonomous vehicles compared to California; however, companies typically undergo extensive testing before launching paid services.

Tesla's advanced driver assistance system, known as Full Self-Driving (FSD), which is central to the company's robotaxi goals, has raised concerns among regulators. Last week, the U.S. National Highway Traffic Safety Administration (NHTSA) initiated an investigation into 2.4 million Tesla vehicles equipped with FSD following four reported collisions, including a fatal accident in 2023.

Despite the challenges, the prospect of Tesla launching a robotaxi fleet caused shares of ride-hailing apps to drop 2.3 percent in after-hours trading.

Disclaimer: This image is taken from Tesla via Reuters