Tesla Robotaxi Day Is a Make or Break Moment for Elon Musk
Elon Musk needs to convince investors that Tesla is still more than a car company. Its stock depends on it.
Tesla was once the red-hot center of car innovation, but now it feels at risk of sinking into irrelevance as just another auto maker. Its coming Robotaxi Day may be Elon Musk’s last chance to convince investors that Tesla still has it.
The rise of Tesla was spurred by Musk’s vision—and he always seemed ahead of the competition. The company was building electric vehicles when few believed they would ever catch on in the U.S. Musk also convinced investors that Tesla could be the Apple of autos, with its own ecosystem selling everything from self-driving technology to solar panels and energy storage batteries to customers, with Musk as its Steve Jobs. By 2021, it was a trillion-dollar company, a year before Nvidia reached that milestone.
But Tesla’s EV lead over its competitors has narrowed, and with it, its aura of inevitability. Companies such as Ford Motor and General Motors in the U.S.; Volkswagen and BMW in Europe; and BYD, NIO, Toyota Motor, and Hyundai Motor in Asia make EVs, including hybrids—an increasingly popular option Tesla has no desire to match. At the same time, all the high-tech gadgets and features a Tesla offers, including the cool screen, the app, and the epic acceleration, are available in cars ranging from Mercedes-Benz Group’s luxury Mercedes EQE to the more affordable Chevy Equinox. Even innovation in self-driving, which has been the North Star for Tesla investors, seems to be coming from Waymo, the Alphabet unit. Tesla stock languishes some 40% below its record high as EV growth decelerates around the globe.
Tesla, though, still commands a premium valuation, at almost 90 times earnings estimates for the next 12 months, putting it among highflying tech companies like Palantir Technologies and Snowflake. Whether the stock will regain its previous highs or sink back to its lows is now up to Musk as he prepares to stand before investors at Tesla’s Robotaxi Day in Hollywood, Calif., on Oct. 10. Ostensibly an event to highlight the self-driving technology that would allow the company to compete with the likes of Waymo and GM’s Cruise, Musk needs to convince investors that Tesla remains a hotbed of innovation and still deserves to be thought of as a tech company like Apple, Amazon.com, or Alphabet. The outcome could determine whether Tesla regains its place among the Magnificent Seven or is relegated to fighting it out with dozens of auto makers for EV market share.
“Few industry events have been as widely anticipated as Tesla’s Robotaxi Day,” says Wolfe Research analyst Emmanuel Rosner. “The opportunity is massive but they still have a lot to prove.”
Musk’s choice of robo-taxis seemed odd when he first announced it in April. His first self-driving prediction came in late 2016, when he said that Tesla expects to take a cross-country autonomous road trip in 2017. He has predicted that true self-driving is just a year away every year since. Even Musk admits he tends to be overly optimistic.
But self-driving is getting closer to a reality, at least for Tesla’s competitors. Waymo is completing more than 100,000 rides a week without a driver. Uber is adding self-driving cabs from Cruise while partnering with Waymo and investing in Nvidia-backed automated driving start-up Wayve. Tesla, for its part, has taken its own path, rolling out incremental improvements to its driver-assistance product called Full Self Driving. Musk has hinted that other auto makers are interested in Tesla’s technology, but no concrete deals have emerged.
Musk will have some convincing to do on Oct. 10. While competitors use laser-based radar, ultrasound, and optical cameras for their self-driving vehicles, Musk believes all that is needed are optical cameras and a neural network—that is, eyes and a big brain, with Tesla’s artificial-intelligence computers acting as driving instructors, building computer code as they receive data from Tesla vehicles on the road.
The Waymo approach has achieved a roughly 75% reduction in crash-causing injuries when compared with human drivers, according to the company. With over 22 million driverless miles driven, Waymo has experienced 46 fewer accidents than would be expected by a human driver in San Francisco and Phoenix. Tesla doesn’t distribute comparable safety statistics, but users of the company’s highest-level driver-assistance product can submit data to performance aggregators. FSD Tracker is one tool that lets investors see performance data by each version of Tesla’s FSD software. That data set shows FSD completes roughly 90% of drives by itself, with drivers needing to take over every 100 miles or so.
“Not close to acceptable,” says Green Hills Software founder Dan O’Dowd, a longtime critic of Tesla’s approach to self-driving. O’Dowd says that performance is equivalent to rear-ending another driver once a month and believes Tesla isn’t close to solving autonomous driving. “I like to think of the autonomous vehicle race as the Tour de France and Elon is on a tricycle,” he adds. Tesla provides safety statistics that indicate that using Tesla’s driver-assistance technology lowers accident rates materially. The technology, however, requires drivers to pay attention 100% of the time.
Still, investors can expect Musk to exude confidence that the technology will work, even if it’s different from that used by his competitors. “I recommend anyone who doesn’t believe that Tesla will solve vehicle autonomy should not hold Tesla stock,” he said in July. It wouldn’t be a surprise to hear Musk say something similar on Thursday.
Tesla’s technology might be different from most U.S. competitors with multiple sensors, but it isn’t all that unusual. Deutsche Bank analyst Edison Yu notes that in China, where competition is fierce and updates come fast, most companies are adopting the same approach as Tesla. “I don’t know the [final] answers…but a lot of people with a lot of money are all moving in that direction,” he says.
To some extent, the debate over approach misses the point. No car maker gets to declare victory by turning on unsupervised self-driving technology in all of its cars. In California, where Waymo operates, there is an application to deploy self-driving cars. While it’s only three pages, section three of the application requires applicants to prove the cars can drive themselves safely. “The DMV thoroughly reviews all information for accuracy before issuing a permit to operate an AV [autonomous vehicle] on California public roads,” says a spokesperson for the California Department of Motor Vehicles.
Only three entities have a license to deploy driverless cars in California: Waymo, start-up Nuro, and Mercedes-Benz, which has a product allowing drivers to stop paying attention on freeways and highways at speeds under 40 miles an hour in ideal driving conditions. Last year, Cruise had its license suspended after an accident. Tesla, along with Mobileye Global, Nissan Motor, and even Nvidia, have permits to test self-driving cars in the state.
Expectations are still sky-high. Coming into the week, Tesla stock had gained almost 50% since Musk announced Tesla’s Robotaxi Day on April 5, helping to arrest a slide that had seen shares slump some 35% to start the year. Meeting expectations will require, at minimum, a physical robo-taxi, a plan to launch unsupervised service no later than 2026, and an explanation of how Tesla will make money from its self-driving cabs.
The excitement isn’t only about the robo-taxi. A growing number of observers expect Musk to also have news on a low-price car known as the Model 2. A lower-price Tesla, starting with a price under $30,000, would help kick-start sales again while expanding the company’s addressable market. “I think we’ll see the Model 2,” Baird analyst Ben Kallo says.
The need is pressing. Through August, Tesla’s U.S. sales were down almost 10% year over year, while overall EV sales grew just 7%, according to Wards Automotive. That compares with 25% for Tesla and 46% for the industry in 2023. Wall Street sees Tesla delivering about 1.8 million cars in 2024, essentially flat with 2023 and down from the analyst predictions of 2.3 million cars a year ago.
Without enough affordable models or charging infrastructure, hybrids have stolen some of Tesla’s shine. Through August, U.S. sales of plug-in hybrid vehicles rose 18% year over year. Sales of so-called mild hybrids, cars with an electric motor and batteries that don’t plug in, grew 35%.
If there is a silver lining for Tesla—and the industry—EVs as a percentage of new car sales are up and sales of electrified vehicles, be they hybrid or fully electric, account for about 19% of total U.S. sales. That’s up some three percentage points from the same period a year ago.
Tesla doesn’t have a solid record of delivering on high expectations at these kinds of events. For every successful presentation—the stock rose 12% in the days after the March 2016 unveiling of the Model 3, the first truly popular mass-market all-EV that people around the globe wanted to drive—others have resulted in disappointment. Tesla stock dropped 16% in the days following Tesla’s 2022 AI event, which included a working prototype of a humanoid robot. Tesla’s first AI event in 2021 featured a person dancing in a robot suit.
“I would not be surprised, and fully expect, the stock to pull back on the event,” says William Blair analyst Jed Dorsheimer, who rates Tesla stock a Buy. “The trend for most of Tesla’s analyst days/big announcements is the stock runs into those as expectations rise…then there is a disappointment”
Success or failure depends largely on Musk. Bears believe he has pulled a bait-and-switch, distracting investors from bigger problems, such as falling sales, rising competition, and declining EV profitability. Bulls believe he has signaled progress on AI-based self-driving technology that would further the narrative that Tesla is more than a car company—and that Musk, who also oversees SpaceX, xAI, and other companies, is fully engaged once again.
Amid the focus on Musk and what might be revealed at Robotaxi Day, it’s easy to forget that Tesla is a very large business. It has the largest network of fast-charging stations and stalls in North America. The company also has a significant—and growing—energy storage unit, offering battery storage for homes and huge “megapacks” for utilities that extend the usefulness of solar and wind-power generators. Tesla has hundreds of thousands of people paying $99 a month for driver-assistance technology that does many tasks but doesn’t turn a Tesla into a truly self-driving car—yet. It also has a burgeoning AI business, with robots trained on Tesla-built computers. Musk has even hinted at building an Amazon Web Services–type business using the computing power in Tesla cars and servers.
Tesla also has a very expensive stock. At $240 a share, Tesla trades for 88 times 12-month forward earnings, a multiple higher than any of the six other Mag Seven companies, rather than the single digits of a U.S. auto maker. A valuation like that implies that investors believe Tesla has a lot more going for it than cars.
A better way to think about Tesla’s worth might be as a sum of its parts, which values each business separately, then adds them together. Selling electric cars should be the most straightforward. It isn’t. Street estimates vary wildly. Analysts value Tesla’s car business as low as $40 billion and as high as $660 billion.
The truth is likely somewhere in the middle. Tesla could sell five million EVs by 2030 as it adds a couple of lower-priced models and, perhaps, a derivative of its full-size Cybertruck pickup. Operating profit margins should be a little better than industry averages, given Tesla’s owned-and-operated supercharging network and driver-assistance features which some people pay monthly to access.
Under those circumstances, the auto business could earn roughly $5 a share in 2030. If Tesla traded at 40 times earnings—about twice the S&P 500 multiple, but less than half where it currently trades—the car business would be worth some $600 billion by the end of the decade. That’s about two times the value of Toyota today for a company that would be about half the size but is growing faster.
Energy storage is the only nonautomotive business that has significant sales today, and William Blair’s Dorsheimer sees it generating earnings per share of $2.35 by 2028, up from an estimated 14 cents in 2024. If growth continues at this pace through the end of the decade, energy storage could match auto business earnings by 2030. At a similar valuation, that means another $600 billion of market value. “We view Tesla Energy as the most underappreciated component of the Tesla story,” Dorsheimer says.
That’s $1.2 trillion in business value by 2030. What’s that worth today? Gary Black uses a discount rate of about 15% to value Tesla stock; that’s essentially what he feels is a fair return for a stock like Tesla. Conveniently, earning 15% a year for about five years means cutting the future value in half to figure out what to pay for it now. So, Tesla’s car and energy business are worth some $600 billion, or a little less than $200 a share.
Then there are all the other bits and bobs that may, or may not, be significant. The robo-taxi business has the potential to be big, if it pans out. RBC analyst Tom Narayan says it could be worth up to $400 billion. Uber Technologies, which is built on the premise that people will pay more than it costs to operate a car for the convenience of not having to drive, has a market value of $153 billion—more than GM, Ford, and Stellantis’s $133 billion combined. Tesla’s nascent humanoid robot business could be worth $22 a share, or $70 billion if Tesla sells 200,000 robots a year costing $50,000 each by 2035, according to Deutsche Bank’s Yu.
It’s hard to value businesses that don’t exist yet. No one owns a droid yet. Still, investors have to wrestle with AI applications to understand Tesla stock. “For Tesla to be one of the Mag Seven, yes, something in AI has to work,” says Yu.
It’s safer to focus on what is working today. Paying $200 for Tesla stock is defensible as long as the EV and energy storage businesses continue to grow. Anything above $200 a share reflects a bet on Musk.
Historically, that’s been a good bet. Now it’s up to him to prove it still is.
