Tesla (TSLA) could reveal new partnership with new sensor provider

Tesla (TSLA) could partner with Arbe Robotics, SPAC current with Industrial Tech Acquisitions (ITAC).

The connection centers on a clue spotted by the Tesla software leaker “green” in late October 2020. According to Electrek, green found a mention of “Phoenix” inside a Tesla software update and speculates that Tesla’s efforts to build in-house radar sensors are failing or falling behind schedule. In a Twitter thread, green says that Tesla may have decided to buy radar sensors from an “outside vendor”:

Anyway the in-house radar efforts appear to either be failing or too far behind the schedule/goals so Tesla apparently decided to buy a solution from an outside vendor again and their product certainly seems to be ticking all the requirement checkboxes.

The vendor appears to be Arbe Robotix and their website has a bunch of material that many of you would find resembling output of a sensor that Tesla cannot include due to perceived loss of face.

And here, in reply to a question of why they think there’s a connection to Arbe, green says:

The radar name is “Phoenix”. I did some search and found of Arbe and their product appears to be ticking all the checkboxes Tesla was looking for to be a mere coincidence. But I cannot be 100% sure hence the wording.

Well, Arbe Robotics’ main product, the radar chipset, is called Phoenix, which is described below:

Phoenix, Arbe’s radar chipset solution, services real-world driving needs by identifying, assessing, and responding to challenging scenarios from the common to the exceptional with 4D ultra-high resolution real-time imaging. No matter the speed, elevation, proximity, size, or surrounding weather and lighting conditions, Phoenix differentiates true threats from false alarms to ensure a safe road ahead for drivers, pedestrians, and other vulnerable road users.

Of course, I’m not the first to spot this possible connection. Several SPAC-related investors have shared the info summarized above. The big question now is, “Is Tesla the unnamed global auto OEM mentioned in Arbe’s presentation? And, if not, will Tesla partner with Arbe in the future?” There’s no clear answer yet.

In addition, ARK Invest has updated their model and price target for Tesla, increasing it from $1,400 (adjusting for the 5-to-1 split) by 2024 to $3,000 by 2025. You can read ARK’s post here. Their tweet on the price target had some criticisms in the comments, some stating that ARK was overweighting Tesla’s autonomy and robotaxi efforts and not focusing enough on Tesla as a clean energy/solar play. Do with that what you will.

For reference, Tesla currently uses Continental’s ARS410 radar system with a range of ~170 meters. Arbe’s Phoenix has a range of around 300 meters.

Additionally, Musk recently announced an apparent delay in the continued rollout of their full self-driving (FSD) beta, which began last year and was supposed to be expanded to accommodate higher demand.

Bottom line

Ultimately, the supposed Tesla partnership with Arbe may never come to fruition or perhaps never existed in the first place. I don’t think anyone should buy this stock solely because of a possible connection to Tesla. The good news is that with commons around $10, there’s not much downside if the connection turns out to be nothing. In other words, the premium you’re paying for this unsubstantiated rumor is effectively zero (as it should be).

In my preliminary readings of Arbe, the company seems like a decent target with a quality product and key partnerships with automakers and manufacturers (I have not analyzed the company’s financials or valuation). But, like many SPAC targets, it will take 2-3 years for the company to gain any real momentum—Arbe is estimating an 8x increase in unit sales from 2022 to 2023 and a 6x increase in revenue over the same period (slide 31), but for 2021, it’s estimating just $8m in revenue.

I’ll end by saying that, even without Tesla, there’s a lot to dig into here—past investors, auto and OEM partnerships, upcoming catalysts, financials/valuation, and, of course, all the nerdy details about the radar tech—so someone smarter than me should do some serious DD on it.