The financial pickle facing Elon Musk’s Las Vegas Loop system – TechCrunch

by Emma

Restrictions put in place by Nevada regulators are making it difficult for The Boring Company to meet contractual targets for its LVCC Loop, Elon Musk’s first underground transportation system.

The Loop system at the Las Vegas Convention Center (LVCC) is supposed to use more than 60 fully autonomous high-speed vehicles to transport 4,400 passengers an hour between exhibition halls. However, TechCrunch has been told that Clark County regulators have approved just 11 human-driven cars so far, set strict speed limits, and forbidden the use of on-board collision-avoidance technology that is part of Tesla’s “full self-driving” Autopilot advanced driver assistance system. Tesla’s Autopilot system technically does not rise to the level of fully autonomous, even though it is branded as such. It is considered — even internally, according to exchanges between Tesla and California regulators — an advanced driver assistance system that can automate certain functions.

The financial pickle facing Elon Musk’s Las Vegas Loop system – TechCrunch

LVCC’s parent body, the Las Vegas Convention and Visitor’s Authority, created a contract to incentivize Musk and meet promises. The contract is for a fixed price, and TBC has to hit specific milestones to receive all of its payments. The agreement provides payments at different stages, such as completing the bare tunnels, the entire working system, finishing a test period and safety report, and then demonstrating it can carry passengers. The final three milestones relate to how many passengers it can take. If the Loop can show moving 2,200 passengers an hour, TBC will get $4.4 million, then the same payment again for hitting 3,300, and the same for 4,400 passengers an hour. Together, these capacity payments represent 30% of the fixed price contract.

Instead of moving more than 4,000 passengers an hour, the constrained system could limit the capacity to under 1,000, exposing The Boring Company (TBC) to hefty penalties for missing contractual targets. TBC doesn’t generate revenue from charging passengers. The rides are free.

For instance, during a large trade show like CES, the LVCC will pay TBC $30,000 for every day it operates and manages the system, according to a management agreement newly obtained by TechCrunch. However, the original contract signed by TBC in 2019 specifies a $300,000 penalty for each large convention where TBC cannot move around 4,000 people per hour.

This means that TBC stands to lose hundreds of thousands of dollars throughout a three- or four-day event, above and beyond the cost of running the system. In a typical pre-pandemic year, LVCC would host around a dozen such large shows. It’s unclear if TBC is planning on another means of making money, such as revenue from advertising in its cars.

This capacity issue is already costing TBC money. The contract states that if TBC misses its performance target by such a margin, Musk’s company will not receive more than $13 million of its construction budget. The convention center authority confirmed to TechCrunch that, per its contract, it is withholding that construction fee until TBC can demonstrate moving thousands of people an hour.

According to the agreement, smaller shows, numbering about 20 a year, carry no capacity penalties but earn TBC a much smaller fee of just $11,500 a day. TBC also receives a monthly payment of $167,000 to keep the system ticking over, regardless of how many conventions are running.

A capacity test of the Loop this week reportedly involved just 300 people; a Convention Center official did say the 4,400 people-per-hour figure was “well within our sights.”

As well as its team of human drivers, TBC has to staff an operations center, maintenance, and charging facility and provide uniformed customer service personnel, security staff, and a full-time resident manager, according to the management agreement.

The fee structure is set to be renegotiated — presumably downwards — by the end of 2021 to incorporate the “expected transition to autonomous vehicle operations.”

Collision warnings out

Some of the Loop’s initial operation restrictions came from the Clark County Department of Building and Fire Prevention. These reportedly include a 40 mph overall speed limit, dropping to 10 mph within each of the Loop’s three stations, and a restriction to just 11 vehicles.

Deputy Fire Chief Warren Whitney of the Clark County Fire Department said that TBC had told him the company wasn’t allowed to use the Tesla’s collision warning systems within the Loop. This week, a transportation system certificate issued by Clark County specified that the Loop must use “non-autonomous” “manually driven” vehicles. It was given for the planned 62 cars. Neither Clark County officials nor TBC provided detailed questions on the operational restrictions nor indicated when or if they could be lifted.

Toyota has previously warned that its radar-based collision warning system may not function correctly within tunnels. It is not clear whether the Teslas are capable of safe and “fully autonomous operation” without collision-warning radars. However, Musk has suggested — and now executed on a plan — to remove radar sensors from its vehicles and only use cameras. Tesla started delivering Model 3 and Model Y vehicles in May that do not have radar sensors. The lack of radar sensors has prompted the National Highway Traffic and Safety Administration has say that Model 3 and Model Y vehicles built on or after April 27, 2021, will no longer receive the agency’s checkmark for automatic emergency braking, forward collision warning, lane departure warning, and dynamic brake support. The decision also prompted Consumer Reports to no longer list the Model 3 as a Top Pick. The Insurance Institute for Highway Safety said it plans to remove the Model 3’s Top Safety Pick+ designation.

The Fire Department also had concerns about dealing with emergencies within the tunnels, including battery fires that could potentially last many hours. “There have been cases where electric cars have caught fire without an accident,” Whitney told TechCrunch. “Our plan right now would be just to get the people out, then pull back and let the fire continue to burn.”

Whitney noted the system has many cameras and smoke alarms, as well as a “robust” ventilation system that can move 400,000 cubic feet of air per minute in either direction down the tunnels. This should allow passengers and drivers to escape on foot around the cars. TBC has a tow vehicle (also a Tesla) to extract broken-down vehicles for less severe incidents.

Neither TBC nor Clark County replied to TechCrunch’s queries about whether the Loop would be allowed to transport wheelchair users, children, or infants, usually requiring car seats, people with other mobility issues, or pets and support animals.

Firefighters have already conducted multiple drills in the underground system, including simulated accidents far from a station, with two or three other vehicles in the way. “Eleven cars is definitely doable,” says Whitney. “But when you start increasing numbers of cars, it may be a problem. [TBC] is a for-profit company and is going want to maximize the efficiency, so there may be further discussions as they try to increase the capacity.”

Expansion plans

Not only does TBC want to use more vehicles in the existing Loop, but it is also already planning to expand the system. At the end of March, TBC told Clark County that it had broken ground on an extension from one LVCC station to the new Resorts World hotel, and it has permission for a similar spur to the Encore nearby.

More significantly, TBC also wants to build a transit system covering much of the Strip and downtown Las Vegas with over 40 stations connecting dozens of hotels, attractions, and, ultimately, the airport. That system would be financed by TBC and supported by ticket sales.

The viability of those expansions could depend on how soon TBC can meet the technological and operational promises it made for its relatively simple LVCC Loop and demonstrate whether taxis in tunnels can generate as much revenue as they do column inches.

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