The Tesla (NASDAQ: TSLA) share price hit $264 on Monday (30 September), taking it near to achieving a new yearly high, but still below the $271 price it reached on 11 July.
I’ve been keeping a close eye on Tesla since the launch of its Cybertruck in November 2023. The much-hyped vehicle was one of the earliest imagined electric pick-ups of its kind. However, soon after launch, it faced criticism regarding build quality.
In April, it had to recall 3,878 units due to a faulty accelerator pedal. By that point, the company’s share price had already fallen 40% since the launch. Further recalls occurred in June due to a windscreen wiper issue.
Still, the Cybertruck outsold all other EV trucks in Q2 this year, including Ford’s F-150 Lightning, the Rivian R1T and Chevy’s Silverado EV. It has now sold more than 12,000 units.
Subpar H1 results
Released on 23 July, the company’s half year 2024 results initially disappointed investors. It reported a 45.3% drop in earnings and profit margins down 46.4% year on year. The shares fell 20% in the two weeks following the release. However, they’ve recovered 35% since bottoming in early August.
So what prompted this renewed growth? I certainly wasn’t expecting it.
Robotaxis
Tesla is scheduled to deliver its much-anticipated Robotaxi announcement on 10 October. Like the Cybertruck launch, the official event has been delayed several times. Designed to introduce driverless taxis to cities around the US, the service is likely to face significant regulatory hurdles before being cleared to launch.
Still, asset management firm Ark Invest is enthusiastic about the service, stating it could make Tesla a 10-bagger by 2029. It believes the current $260 price could reach $2,600 in the next five years. This news, coupled with anticipation for the launch, may be a key reason for the recent growth.
Cost implications
Competitor companies, like Alphabet, have already made some inroads in the autonomous driving sector. Its Waymo self-driving project already has 700 LiDAR-enabled vehicles in operation. This is a very different system than the one proposed by Tesla. Elon Musk has criticised LiDAR for being unnecessarily complex although many believe the real reason for his dislike is the high cost.
Instead, Musk believes AI-enabled cameras can deliver a more effective self-driving experience. However, considering the many issues plaguing Tesla vehicles and its autonomous driving system, I’m not so enthusiastic. Realistically, I don’t see the Robotaxi service launching any time soon.
The regulatory hurdles alone are one thing — convincing the general public to trust the questionable AI-enabled system is a whole other story.
What does this mean for the share price?
If there’s one thing Tesla is good at it, it’s marketing. Like previous product announcements, the Robotaxi event will likely be an over-the-top spectacle filled with fanfare and glamour. If it goes off without a hitch, short-term share price growth is likely.
But one has to wonder how much longer Tesla can ride this wave of cult fanaticism. Will the many disgruntled Cybertruck owners drool at the chance to jump in a Tesla Robotaxi? Will the fervour be enough to tide it over until its next big launch: the humanoid ‘Tesla Robot’?
Personally, I find it all very unpredictable, which is why I’ve always avoided the stock and will continue to do so.
