With the proviso that he is a “pathological optimist” he told CNBC in a one-hour interview that the revenue that would flow to Tesla from its Robotaxi business could boost Tesla operating margins to “70 per cent or more”. Margins are currently running at 25 per cent, he said. 

Mr Musk said that revenue from the Robotaxi business would be shared with participating Tesla owners at a ratio, he speculated, of 50-50 or 70-30 and that full autonomy would be available to download into existing Teslas soon. “It looks like it is going to happen this year”, he said.

He said the key to the business model is that Teslas already have the built-in systems to drive autonomously and that the software, when it is finally ready, can be downloaded from Tesla into these cars making a ready pool of vehicles for Robotaxi services.

Mr Musk has made many predictions in the past about autonomous cars but his vision for revenue generation for Tesla owners by selling them software to share their cars for profit takes the concept further. 

Investment analyst Cathie Wood’s ARK Invest, a long-time believer in the potential of Tesla, said it has modelled the Robotaxi and analysis of the “autonomous Uber” business shows it could bring in $US 613 billion in revenue by 2027 and account for two-thirds of the company’s enterprise value.

ARK Invest said Tesla share price could reach $US 2400 per share putting the company’s market value at $US 8 trillion.

Tesla shares have been trading at $US 270 in recent days making a market cap of $US 845 billion. In the past year Tesla shares have traded as low at $US120.

ARK analyst Tasha Keene told Yahoo Finance Live: “We have actually modelled the opportunity in Robotaxis in autonomy, and if you look at the future of Tesla vehicles that are capable of becoming Robotaxi enabled, and earning a recurring revenue stream at what we think will be at software-as-a-service like margins, this is an amazing potential for Tesla. It will definitely be the highest return on investment per battery produced.”

“We think the market for Robotaxis globally could be worth $US 9 trillion to $US 10 trillion in the next decade,” Ms Keeney said. The estimated value of vehicle manufacturing globally is $US3 trillion.

Ms Keeney said that while Mr Musk was saying it was possible Tesla would unveil fully-autonomous software by the end of the year, “mid-2024 is a more realistic expectation”.

Mr Musk told CNBC that it was technically possible to sell Teslas at no profit and still generate “tremendous revenues” over time.

“Tesla is the only car company selling cars where we believe that the car is capable of achieving full autonomy with software updates. Autonomous Uber is the way to think about it.

“So the value of a fully-autonomous car is, we think, perhaps five times more than a non-autonomous car,” he said.

He said that a passenger vehicle is typically used for only 10 to 12 hours a week and is parked the remainder of the time.

“You have a lot of costs associated with parking. You need a garage or you have to buy a parking space. We have to get a parking ticket at the mall. There are a lot of costs associated with cars. 

“If you have a car that’s autonomous it can go around and essentially be like an autonomous Uber then the utility, I think, is going to be much higher; perhaps that would be in the order of 50 hours a week.. There are 168 hours in a week.  But it’s the same car and it cost the same to build.”

Under the arrangement owners, instead of parking while they are not using their car, the vehicle autonomously drives off picking up other people and dropping them off until required by the owner again.

“The owner of the car would make some amount out of it. Who knows what it will be, but perhaps it could be a 50-50 split or 70-30, I don’t know.”

Mr Musk said that an allowance for a Robotaxi service has been in the Tesla terms and conditions “for quite a long time”.

“If you buy a Tesla car, it can only be used on the Tesla network. It cannot be used in someone else’s network.”

Referring to profitability, he said: “That means that if the car is able to be used five times as much, Tesla is likely to make basically, two or three times the original sale value of the car in Robo taxi revenue.

“This is gigantic. It would be like selling cars for software margins because it is software. So instead of effectively having say 25 per cent margins it might be 70 per cent or more. The free cash flow associated with that is actually a truly staggering amount.”

Analysts are saying the full self-driving software will be able to be sold to owners for a 100 per cent gross profit. 

Regarding timing, Mr Musk told CNBC: “I guess I have a somewhat of a pathological optimism … but in my opinion … it looks like it’s gonna happen this year.

“”We are now at the point where the car can drive on highways and in cities where a human intervention is extremely rare.  (Recently) I was able to drive for several days, just dropping a navigation pin in random locations in the Greater Austin area (Texas) with no interventions. And the same as San Francisco which is a very difficult place to drive with bus lanes and one way streets. 

“So I am optimistic for that reason. It is the first time I’ve had a situation where there’s been several days in a row picking random destinations and having no safety-related intervention. So that’s the first time ever.”

Meanwhile Mr Musk said that Tesla was able to actively price its cars to demand in a similar manner to airlines pricing seats based on availability.

“We have real-time information on demand. So we know how many people placed an order for a Tesla yesterday. We get an automated email to the executive staff that says how many people placed an order, in which countries, and for which cars. So we know what the orders were yesterday. 

“We don’t overreact to these things because sometimes you get little dips for reasons that are hard to explain. But we have been basically adjusting pricing to match demand. 

“We obviously did a big price drop in Q1, but critically January is usually a terrible time for car buying. So we did with a big price drop and then recently we put in a price increase. 

“All car companies make significant adjustments to prices,” he said. 

“You have the MSRP (recommended retail price) number. If demand is high, the dealers will charge some premium over MSRP. If demand is lower, they will have manufacturing incentives. 

“So you can actually see very big differences over the course of six months between the peak to trough of all cars, it’s just that with Tesla it is so immediately obvious and transparent. It’s not a question of MSRP, and then a markup.”

By John Mellor