Elon Musk’s Tunnel System Works, but the Real Test Is Still to Come

(Bloomberg) — The CES technology show in Las Vegas last week was an important milestone for Elon Musk’s Boring Co., which operates a network of underground tunnels to ferry passengers around the massive convention center in Tesla Inc. cars.

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The Vegas Loop performed mostly well, despite hitting some snags that were caught on video and drew mockery on Twitter toward a company that has said its mission is to “solve traffic.” Another element of Musk’s initial vision also appears to be fading: The vehicles rely on human drivers behind the wheel, a stipulation that’s unlikely to change anytime soon.

However, Las Vegas officials indicated they were satisfied with results last week. Numbers provided to Bloomberg by the Las Vegas Convention and Visitors Authority show that the transit system successfully transported some 15,000 to 17,000 people daily during CES, almost half the show’s attendees. According to the Boring Co., the average wait times at its three stations were less than 15 seconds. Rides took less than two minutes on average, in line with what the LVCVA predicted when reporters visited the site in April.

The numbers show a solid performance for Boring Co., though CES was hardly the rigorous tests of its systems some were hoping for. Because a Covid-19 case surge dramatically cut down attendance at the conference and shortened the event, many fewer people took the tunnels than otherwise would have. It remains to be seen how the system will hold up under radically higher demand.

The throughput and durability of the Boring Co.’s Las Vegas tunnel system—the company’s first commercial project—is important for few reasons. First, the startup is in negotiations with several cities around the country, all of which are probably eager to see how the startup’s technology performs in the real world before they sign a contract.

Second, the company’s compensation for the Las Vegas project is tied to how it performs during large conferences like CES. Under terms of its contract, Boring provided a $4.5 million letter of credit to the LVCVA. The money that Boring Co. owes the authority will be reduced by $300,000 each time the company transports an average of 3,960 passengers per hour for 13 hours at a large conference.

Because this year’s show attracted only about 40,000 attendees, compared with 170,000 in 2020, the smaller crowds almost certainly mean that Boring wasn’t able to prove that it could meet the passenger minimum outlined in the contract. The LVCVA declined to provide the hourly averages.

But the company was able to hit those numbers during a recent test, the agency said. In December, LVCVA Chief Financial Officer Ed Finger told the authority’s audit committee that accounting firm BDO confirmed the system was transporting 4,431 passengers per hour in a test in May. That was more than enough to allow Boring to receive the final chunk of its $44.25 million total payment, per its contract.

The test ran for an hour and involved more than 300 volunteers, Finger said. The contract allows for Boring to run tests using 10% of the vehicles required for system capacity, with the addition of an engineering analysis to predict what the rates would be if more vehicles were used. After the tests, the county approved an increase to 70 Teslas for the transit system.

If the Las Vegas project is a success, it could embolden other cities to ink contracts with Boring Co. Fort Lauderdale, Florida and San Bernardino County, California, are in various stages of negotiations for their own tunnels. In San Bernardino County, where Boring Co. has until the end of this month to submit a proposal, the plans are still in limbo.

“Negotiations have proved challenging,” said Carrie Schindler, director of transit and rail programs for the county transportation authority, during a public meeting on Thursday. She said that although the Boring Co. originally proposed autonomous vehicles, it was “no longer committing to autonomous technology,” which would affect the county’s budget for the eventual operation of the project. Autonomous technology had once been a key selling point of Boring Loop systems.