Tesla‘s (NASDAQ: TSLA) been one to watch in the electric vehicle (EV) market for years, but its latest announcement has caught my attention as an investor. The EV giant plans to launch its Full Self-Driving (FSD) software in Europe and China during the first quarter of 2025, pending regulatory approval. This expansion could be a game-changer for Tesla’s global market presence and, potentially, its share price.
A volatile year
With a market capitalisation of $673.2bn, the shares dropped 23% in the last year, which might give some investors pause. However, looking at the bigger picture, the firm’s five-year return stands at an impressive 1,189%, showcasing long-term growth potential.
Management’s plan to bring FSD to Europe and China is a significant move. Recent regulatory changes in Europe have paved the way for the firm to introduce its more advanced features without major modifications to driver monitoring systems. These markets represent vast opportunities for the company to expand its advanced driver assistance technology, and gather more data to train AI models.
The announcement sent the shares jumping more than 7%. This reaction suggests that investors anticipate additional FSD-driven revenue from these new markets, after a long period of uncertainty over whether the technology would be compatible with stricter regulatory bodies.
So what’s next? The company’s innovative approach extends beyond just FSD. The company’s announced plans to add park, unpark, and reverse drive functions, further enhancing its capabilities. These ongoing improvements could help the business maintain its competitive edge as competitors continue to make progress.
Plenty of risk
While the expansion plans are exciting, it’s important to approach this news with a balanced perspective. CEO Elon Musk’s timelines have been known to be optimistic in the past, and regulatory approval’s never guaranteed. The actual launch date could be later in 2025 or beyond, depending on various factors.
Additionally, the FSD system’s faced criticism and scrutiny in its home market, the United States. Some users have reported that the system, while capable of driving the car, doesn’t always do so safely or smoothly. This could easily lead to challenges in gaining regulatory approval and consumer trust in new markets.
From a financial standpoint, the current price-to-earnings (P/E) ratio of 54.3 times suggests that the shares are priced for high growth expectations. A discounted cash flow (DCF) calculation also suggests the shares are about 43% overvalued at present. If the company fails to meet these expectations, it could lead to a sharp decline.
Of course, plans to expand FSD to Europe and China represent a significant growth opportunity. The company’s strong brand presence and technological leadership in EVs could give it a notable advantage as it enters new markets.
I’m paying attention
For me, Tesla’s ambitious plans for FSD expansion make it well worth watching the share price. The potential for increased revenue and market share in Europe and China could be a major catalyst for future growth. So while the timeline for the launch, and the plentiful risks, make this a company prone to a few bumps along the way, I can see this being a meaningful moment for the future of the technology.
With more data, the systems can continually improve, unlocking even more potential. I’ll be holding on to my shares and keeping an eye on the price for further opportunities.
