As the race to dominate the robotaxi sector intensifies, Uber Technologies Inc (NYSE:UBER) is leveraging its extensive ridesharing network to compete against Tesla Inc. (NASDAQ:TSLA) and Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG) subsidiary, Waymo.

What Happened: Uber has shifted its focus from developing autonomous vehicles to expanding its marketplace of riders and drivers. This approach has created a strong network effect, making it difficult for competitors to match its scale, reported Business Insider on Thursday.

Uber's business model, which avoids the costs associated with owning and maintaining vehicles, has proven financially successful, generating $1.7 billion in free cash flow in the second quarter.

In contrast, Tesla and Waymo face the challenge of building and maintaining costly autonomous fleets. Analysts at Bernstein highlight the complexity and expense of operating a large-scale robotaxi network, which includes regulatory hurdles and high fixed costs.

"There are real challenges around scaling a pureplay autonomous network, including the underlying technology, regulatory approvals, building a large-enough supply-base to run a high quality network (especially during peak hours when consumers need the service the most), and ultimately getting customers to adopt the service," the analyst wrote, according to the report.

Uber's existing network and user base offer a significant advantage, as it can integrate autonomous vehicles from partners like Waymo and Cruise, enhancing its service without incurring the same level of expenses.

Uber's ability to aggregate demand positions it as a valuable partner for autonomous vehicle companies, providing access to a large and active user base. This strategic advantage could play a crucial role in the evolving robotaxi landscape.

Why It Matters: The robotaxi market is a battleground for major players like Tesla, which is exploring scenarios for its future valuation based on its autonomous driving capabilities. Analyst Pierre Ferragu has outlined potential outcomes for Tesla's ambitions, emphasizing the importance of achieving unsupervised full self-driving capability.

Despite optimism surrounding Tesla's robotaxi plans, some analysts, like Ming-Chi Kuo, predict mass production may not occur until 2027. Meanwhile, Baidu is considering expanding its robotaxi unit, Apollo Go, into international markets, adding to the competitive landscape.

Moreover, Gary Black, Managing Partner at The Future Fund, has expressed skepticism about Tesla's ability to maintain a monopoly in the autonomous driving market, citing competition from Waymo, Baidu, and others.

This story was generated using Benzinga Neuro and edited by Kaustubh Bagalkote