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ARK Invest reiterated its stance on Tesla’s ride-hailing service in its recent newsletter. The global asset manager wrote that Tesla’s Robotaxi fleet may be an overlooked opportunity for the EV automaker to increase its margins.

“While ARK still believes that Tesla will be the market leader in autonomous driving, certainly in the US, if it were to launch a human-driven ride-hailing network, the bridge to autonomous would increase its margins and lower its risks considerably,” wrote ARK analyst Tasha Keeney.

Keeney previously explained ARK’s views on Tesla’s Robotaxi fleet in an interview with TD Ameritrade Network. The analyst and her colleagues at ARK believe that Tesla should launch its ride-hailing service now with human drivers because the pandemic has created certain needs that could be filled by the industry.

Tesla's Robotaxi Fleet Could Command Near-Monopoly In Autonomous Ride-Hailing Market, Says ARK Invest https://t.co/3V324S2MRJ pic.twitter.com/tysH5o6VkR

— Tesmanian.com (@Tesmanian_com) April 28, 2020

Keeney explained that most people in the world right now are looking for ways to generate extra income and fewer people are riding public transportation to keep safe. Tesla’s Robotaxi fleet could fill both those needs. During the interview, she also stated that the EV automaker’s ride-hailing service could protect Tesla from ARK’s bear thesis.

"…this ride-hailing network basically provides sort of—you know—a downside protection risk on that [bear] case. So [Tesla] still transforms their business into a software-as-a-service-like model. And we think it could be a great opportunity and Tesla should actually launch now,” said Keeney. 

ARK’s bear thesis centers on the possibility that Tesla fails to launch an autonomous network. For the global asset manager, an autonomous network impacts Tesla’s 2024 price target (PT) significantly.

ARK predicts a PT of US$3,400, if Tesla manages to lower costs, build factories efficiently, but fails at launching its autonomous network. In contrast, ARK forecasts a PT of US$15,000 if Tesla manages to launch its autonomous network, but fails to lower costs or build factories efficiently.

ARK Invest Shows Tesla’s Path to $15K Bull Case and a $22k Golden Goose Scenario https://t.co/fqO1PQ1YX1 pic.twitter.com/L5PNykXjov

— Tesmanian.com (@Tesmanian_com) February 1, 2020

At the recent Q2 Earnings Call, Zachary Kirkhorn acknowledged the revenue Tesla’s ride-hailing network could bring to the company. Kirkhorn was answering a question from Alliance Bernstein’s Toni Sacconaghi, who asked: How do we think about ultimately what industry-leading margins are? And how much of that you think is coming from EV credits, regulatory credits?

“Sure. I've mentioned this before in terms of regulatory credit. We manage the business—we don't manage the business with the assumption that regulatory credits will contribute in a significant way to the future,” replied Kirkhorn to Sacconaghi’s question. “I do expect regulatory credit revenue to double in 2020 relative to 2019, and it will continue for some period of time.”

Kirkhorn also noted that the cost to produce and distribute Tesla vehicles continue to decline over time, even for older products like the Model S and Model X. He added that Tesla would have opportunities to increase revenue through its ride-hailing network and software in the future.