Elon Musk’s Boring Company is boring… For now.

Elon Musk. What can you say about him? The Nikola Tesla of the 21st Century. Maybe he will succeed, maybe he will fail, but he already left a mark and he’ll never be forgotten.

One of his latest crazy (in a good way) initiatives is the Boring Company, focused on excavating tunnels under cities to reduce street traffic. The name is a nice pun on the fact that “boring” means “excavating”, and it has been so far a very “boring” (uninteresting) topic.

Elon’s idea is to rivolutionize the technology being used to excavate, to justify boring tunnels under a city like LA, and then offer automated transportation from point A to B for cars.

Here’s a short video released just a few days ago:

Many people have already heavily criticized this initiative, based on mostly superficial or wrong assumptions.

What I’d like to do is to take a closer look and try to discern whether there’s a real opportunity here, or not, and if the Boring Company has a chance to succeed.

State of tunneling today

Government-funded, large infrastructure projects are typically the ones where the digging of a large tunnel is involved.
There is little economic incentive to increase the efficiency of the TBMs (Tunnel Boring Machines), because that’s only a small fraction of the total cost.

There are several types of TBMs (Tunnel Boring Machines), also called moles, such as Earth-pressure balance (cutting wheel pressed against the tunnel face by hydrolic cylinders), mixed shield TBMs, and so on.
The “new Austrian method” (it’s 50 years old; when are they going to drop the “new” in the name?) might be the most recent relevant innovation that happened in the tunneling industry.

Tunnels are primarily dug for cars powered by a combustion engine, which requires the tunnels to be large enough to support multiple lanes of traffic AND the expulsion of exhaust gases. Tunneling machines are therefore huge — they require big efforts to be transported on site and assembled, and then another big effort to start operating them.

As you can guess, and as Musk points out, being able to reduce the diameter of the tunnel is one of the most relevant ways to reduce its total cost.

Furthermore, most manufacturers of TBMs have little incentive to invent better ways to dig, or to “risk” recent innovations and apply them to TBMs.

For example, the latest innovation in saws is the water jet cutter: it uses water, sent at very high pressure (up to 100,000 psi) and mixed with an abrasive substance, against the material that needs to be cut. The water jet exits at supersonic speeds (up to 4,000 km/h), and is capable of cutting any material with high precision and minimum waste.

Nobody has successfully or extensively applied water jet technology to excavation of tunnels, because at these companies the “innovation cycle” lasts for 15–20 years — in other words, any new idea, assuming it gets funded, takes 15–20 years to make it into a commercially available solution.
You are starting to see “some” use of water jet cutting in tunneling today, and only for minor “retouches”, not for the main digging.

As you might agree, the sector is really boring, and ripe for disruption — or at least, ripe for a faster way to introduce new technology that can improve efficiency, increase speed, etc. 
Can Elon Musk bring this disruption to tunneling?

The opportunity

Let’s assume, for a moment, that the Boring Company can drastically reduce the cost of tunneling — by 10x.
Current cost in optimal conditions (medium, stable rock; no big water infiltration; etc), with the best machinery available, runs at about $20,000 per foot excavated. Average costs in good conditions, with good machineries, are more in the area of $30,000 per foot. Let’s say that the Boring Company gets to $3,000 per foot. His claim of “$10M for a mile-long tunnel” (which equates to less than $2,000 per foot) might be really too aggressive.
But even more aggressive is to increase the speed of digging from an average of 300 feet/week to 5,000/week (one mile), or 15x.

But still, let’s assume that he manages to do that. He’s Elon Musk, after all.
Can this then become a real business? And can it stand competition from Herrenknecht AG and other TBM manufacturers? Or is competition going to come from another angle?

Let’s say you start offering an LAX to Beverly Hills, which is 12 miles of driving, and usually 50 minutes of traffic; or LAX to downtown LA, which is 17 miles and usually an hour of traffic.

Los Angeles airport (LAX) to downtown LA — 17 miles, and usually an hour sitting in traffic

You would need to build several “elevators” to load the car into the tunnel; then power the tunnel with those nice-looking automated “pods”, and make the car emerge at the other end through another elevator.
This “car elevator” needs to be excavated, you need to build an actual elevator in the shaft, and you need to pay permits to the city. Let’s assume that you can build one for a million dollars. Let’s also assume that each elevator can carry one car every minute.

Ok, get ready for some back-of-the-napkin calculations.

30 “car elevators” in LAX: $30M
30 “car elevators” in downtown LA: $30M
17 miles of tunneling: $170M
Additional costs (electrified, automated pods; miscellaneous stuff): $20M

Total is $250M. You can transport 30 cars per minute from LAX to downtown LA. Assuming there’s demand for that volume for 20 hours a day, it means you can transport a total of 36,000 cars/day on that single trip alone, or 13 million cars a year. With a “ticket” of just $10, and assuming that $2 dollars out of each trip are going for operational costs… You make more than $100M a year in revenues, from an investment of $250M.

You can easily imagine similar numbers for dozens of trips across LA, or many other cities in the world.

Conclusion

The Boring Company is boring. For now. If they get their ducks in a row, and manage to bring down the price of excavation, this might be a really huge, really profitable business.

I still have my doubts… But I see the value proposition now.

The three biggest concerns I still have are simply:

  1. Can they reduce boring costs to an acceptable level?
  2. Will driverless/autonomous cars manage to vastly reduce car traffic, so that the value proposition of using a tunnel loses value?
  3. Can they raise enough money to build this network of tunnels in a reasonable time, and fend off the competition?