In the third century BC the city of Rhodes, in celebration of the defeat of Demetrius I of Macedonia, built the Colossus, a 30-metre-high statue of the sun god Helios. It became one of the seven wonders of the ancient world.
Now there is a new Colossus to wonder at, not a statue but a supercomputer, reputed to be the most powerful in the world. So which American tech company built it? Apple, IBM, Google, OpenAI? Actually, none of the above. The new Colossus has been built by a US auto company… Tesla. How come?
In the space of 14 years, Tesla has risen from being the manufacturer of an electric sports car based on the Lotus Elise and powered by mobile phone batteries to an EV behemoth which, despite competition from China’s BYD (Build Your Dreams), is the world’s largest producer of EVs. Tesla has achieved this with only two mainstream models – the Model 3 sedan and the Model Y, a mid-size SUV. (It should be noted that these figures do not include hybrids. Nor should they. As one analyst wittily pointed out, in technology terms it would be like a company sticking a petrol engine on the back of a horse in the early 20th century, when the world transitioned from horses to internal combustion engines.)
Sales of Tesla’s Model Y (a four-year-old car) are poised to now overtake Ford’s F-150, which has been America’s top vehicle every year since 1977. Last year, Tesla’s SUV was the world’s best-selling vehicle, even though it is relatively expensive compared to the previous title holder, Toyota’s subcompact Corolla.
If this year has been a year of consolidation in terms of Tesla’s EV sales, next year is likely to see a second wave of exponential growth. The now-dated Model Y is likely to be replaced. As with the Model 3, which was replaced at the end of last year, the improvements in build quality, technology and battery life are likely to be spectacular.
In addition, next year Tesla is slated to build a cheaper ‘Model 2’ using elements of a revolutionary manufacturing system called the ‘unboxed’ method, which is expected to cut production costs by 30 per cent. Meanwhile, Tesla’s futuristic Cybertruck, an electric pickup, is already being produced at a run rate of 50,000 vehicles per year. That compares with GM’s electric pickup, the Hummer, which only sold 13,001 units since its introduction in 2021.
Lastly, Tesla will start production of a £230,000 ‘Semi’ (lorry in British parlance) in a new gigafactory in Nevada in 2025. It plans to have a production capacity of 50,000 units per annum; in an industry where most semis are quasi hand-built, this would be the most automated plant in the world. The new plant is next to Tesla’s Gigafactory I, which will overtake the Gigafactory in Austin, Texas, as the world’s biggest manufacturing facility when its current build-out is completed.
Despite these production plans, which will likely increase Tesla’s capacity from 1.8 million units to 3 million units per annum over the next two years, its CEO and founder, Elon Musk, places little value on its automobile business. As he recently told investors, ‘I recommend anyone who doesn’t believe that Tesla would solve vehicle autonomy… should sell their Tesla stock.’ He is right. At a £575 billion market capitalisation, Tesla is massively overvalued as a car company or even as a utility-scale battery power manufacturer, in which it is also a world leader.
However, Tesla would appear to be close to reaching the Holy Grail of autonomous self-driving. Musk’s confidence is such that, last week, he appeared on stage at Warner Brothers’ vast Burbank, LA studio complex to launch the Robotaxi, Tesla’s dedicated autonomous vehicle which is designed with no steering wheel or pedals.
This is where Tesla’s Colossus comes in; its computing power is such that it can massively increase the company’s neural network training capacity. Colossus comprises a water-cooled array of 100,000 Nvidia H100 GPUs (£23,000 each). A projected expansion next year will add a further 50,000 H100s, plus 50,000 H200s. The total cost will be in the region of £3.8 billion, which shows the extent to which Musk has gone ‘all-in’ on real-world artificial intelligence.
The result is that Tesla’s ‘Supervised Full Self Driving (FSD)’ system is rapidly improving to the point where it will be considerably safer than human drivers. On current trends, it will soon be ten times safer. In the past fortnight alone, Tesla has added ‘Smart Summon’ to its FSD. For example, Teslas can drop off their owners at a supermarket and then park themselves. After buying groceries, the Tesla owners can then ‘summon’ their car using a phone app.
Tesla’s Robotaxi launch has been compared to the legendary introduction of the Apple iPhone by Steve Jobs in June 2007. But whereas Jobs’s iPhone presentation was brilliantly slick, Musk’s ‘We Robot’ presentation was chaotic. Self-admittedly aspergic, Musk is an erratic performer. His jerky bodily movements, his stuttering speech, and his frequent hyena laugh sometimes make him appear like a malfunctioning robot… unlike the platoons of humanoid robots who interacted with the invited audience at Warner Brothers.
The fact is that Tesla’s humanoid robots are being trained in the same way as its Robotaxis. Within two years, Tesla has propelled itself to the lead of the race to produce humanoid robots. Next year, Tesla aims to have up to 2,000 humanoid robots operating in its factories. Last Friday, Tesla’s robots played a more entertaining role. At Warner Brothers’ Westworld (after the dystopian film Westworld, starring Yul Brynner), Tesla’s cowboy-hatted robots poured drinks and gave out snacks. They even played ‘rock-paper-scissors’ with guests while they waited for their ride in the 20 Robotaxi prototypes.
Given that Musk has gone all-in on his support for Trump, his Robotaxis may not be too welcome in Democrat states
While the value of a business that dominates the Robotaxi market has been estimated at £3.8 trillion or more, the value of the humanoid robot business, which Musk aims to sell for £23,000 per unit from 2026, is expected to be much more; ‘the biggest product ever’, as he has described it.
So, what are the pitfalls for Tesla in this ‘brave new world’? Firstly, there are rivals such as Google-owned Waymo in America and Baidu in China. Over the past two years, they have built up significant automated ride-hailing businesses in cities such as Wuhan and San Francisco. However, Waymo and Baidu rely on expensive geofenced systems supported by radar; on the road, their cars appear to be carrying a traffic cone atop a surfboard above their vehicles. It is estimated that they cost up to £115,000 each compared to a Tesla Robotaxi, which, relying only on inexpensive cameras and neural network training, will cost just £23,000. A fearful Uber has now formed a defensive alliance with Waymo to combat Tesla’s Robotaxi. Perhaps the best indication that Tesla may crush Uber is that its CEO, Dara Khosrowshahi, sold £53 million of Uber stock in June.
Secondly, there is the problem of public acceptance for automated taxis; in San Francisco, Waymo’s cars have suffered Luddite attacks, and in Wuhan, there has been a public outcry over risks to jobs. Thirdly, there is the problem of regulation. Musk plans to roll out autonomous driving in California and Texas next year. But given that Musk has gone all-in on his support for Trump, his Robotaxis may not be too welcome in Democrat states.
Neither will Musk be popular at the federal level. Democrat-leaning federal institutions such as the FAA (Federal Aviation Administration) and the FCC (Federal Communications Commission) have already blocked Musk’s SpaceX company from launching its revolutionary Starship and from deploying its broadband Starlink business, which has doubled its subscribers from 2 to 4 million since 2022.
There has been little love lost between Musk and President Joe Biden, who gormlessly excluded Tesla from his White House EV summit in 2021. But whereas Musk, like most California techies, voted for Biden in 2020, he has now gone all in for Trump, appearing at his rallies and donating hundreds of millions of dollars in support. If Kamala Harris wins, Musk, who has described Harris as a ‘puppet’, is aware of the consequences; as Musk only half-jokingly said to Tucker Carlson, ‘If he [Trump] loses, I’m fucked.’
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