Al Root

Uber Technologies stock was down early Wednesday after Tesla CEO Elon Musk said he didn't need to buy the ride-hailing company. Wait, what? Was that on the table?

Musk sat down with CNBC's Mark Faber on Tuesday afternoon in Austin, Texas, where Tesla plans to launch a self-driving ride-hailing service in June. Faber asked why Tesla doesn't buy Uber to give its business an immediate boost.

"There's no need," answered Musk.

Uber has created a digital platform to manage demand for rides and the supply of drivers. Musk says Tesla can develop an app of its own. What is more, "we have millions of cars that will be able to operate autonomously," he said.

Musk is referring to Tesla vehicles owned by regular car drivers, which will be able to operate autonomously when Tesla's full self-driving software gets good enough. He envisions Tesla owners renting out their vehicles to Tesla to make money when they aren't using them. It would be like Airbnb, but for cars.

Uber stock was down 1.9% in early trading at $90.13, while the S&P 500 and Dow Jones Industrial Average were off 0.6% and 0.9%, respectively.

The effects of autonomous-driving technology have been debated for months. Fear about self-driving cars, and how they might affect companies such as Uber, likely reached its peak a year ago, around the time Musk announced that Tesla would host a robo-taxi event in August. The event was eventually held in October.

From the end of 2023 into the summer of 2024, Uber stock declined about 5%.

Still, Uber has its own self-driving strategy, announcing deals with Waymo to bring self-driving cars to Uber's networks in Austin and Atlanta. That helped calm investors' nerves. Coming into Wednesday trading, Uber stock was up about 55% from its summer 2024 lows.

Investors are still waiting to see how the self-driving ride-hailing market works, but it doesn't have to be a winner-take-all market. For starters, fleets of cars are expensive. Musk believes one of Tesla's key advantages is all the car buyers who have already paid for Teslas. Having a partner like Uber could lower capital costs for Waymo, or even for Tesla.

There is also something to be said for the Uber brand. "Uber" has essentially become the verb for using a ride-hailing service.

Musk's comments might have surprised investors, a little, eliminating any small price premium reflecting the long odds of a buyout.

The challenge now is to understand and assess the development of the robo-taxi market in the coming years, and then to pick winners and losers.

Uber is valued at $190 billion, more than General Motors, Ford Motor, and Stellantis combined. Tesla is valued north of $1 trillion.

Exactly how much is related to robo-taxis is hard to say. Most bullish Tesla analysts say a majority of the value is due to Tesla's AI expertise, which teaches cars to drive themselves.

Alphabet, which controls Waymo, is valued at $2 trillion. How much Waymo of that represents is hard to say. Most of Alphabet's money still comes from Google's search business.

It is safe to say there are hundreds of billions, even trillions, of value at stake in driverless cars. That is a large enough market to keep investors optimistic about Uber.

Write to Al Root at allen.root@dowjones.com

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May 21, 2025 10:10 ET (14:10 GMT)

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