Elon Musk announced Wednesday (29 January) that unsupervised Full Self Driving will be arriving in the US within six months. And Tesla (NASDAQ:TSLA) stock’s up 4% as a result.
Even by Musk’s standards, this is bold. But the Tesla CEO’s been inaccurately forecasting the imminent launch of a robotaxi network for years, so should investors think this time’s any different?
Sales and profits
For Tesla, keeping investors focused on the prospect of driverless vehicles – and not on its car sales – is probably a good thing. The results for the fourth quarter of 2024 were disappointing.
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Expectations were low going into yesterday’s report. But the results still fell short of even those, as record vehicle deliveries resulted in an 8% drop in automotive revenues. Realistically, this probably doesn’t matter. Even if the results had been better than anticipated, car sales aren’t why Tesla’s market-cap‘s almost 14 times that of Ford and General Motors combined.
The reason also isn’t energy storage or affordable vehicles. The current share price is a reflection of investors believing the firm’s going to achieve its robotaxi ambitions – and they have to be right.
Is this really happening?
A lot has to happen for the kind of autonomous vehicles Tesla shareholders are imagining to become a reality. The most obvious thing in the company’s way is regulatory approval.
This has the potential to be an ongoing issue. The proposal to start in Texas (where regulatory barriers are low) makes a lot of sense, but launching into different states will bring new challenges.
On top of this there’s still the issue of the technology itself. Tesla’s latest footage shows its cars driving themselves from the factory to the loading dock, but this isn’t new.
Showing it can operate in closed environments – as it did last year – is one thing. But there’s a big difference between this and driving around a town or a city.
What if it doesn’t happen?
Given Musk’s track record and the challenges ahead, investors would have to be extremely brave to bet on Level 5 autonomous vehicles by June. The good news though, is that they don’t have to.
If – for whatever reason – Tesla falls short of its targets, the stock might go down. But its shareholders will need to work out whether the robotaxi network has been delayed (yet again) or cancelled. Further delays probably don’t matter. Despite its CEO’s announcements, the company achieving its ambitions a year late will still make the stock an excellent investment at today’s prices.
The story’s different however, if Tesla doesn’t get there at all. In that situation, no amount of efficiency in car manufacturing’s going to make the business worth the current share price.
What should investors do?
Investors are doing exactly the right thing (and have been for some time). Rather than looking at the share price, they’re trying to figure out the underlying business, which is what will ultimately matter.
Given its CEO’s track record on robotaxi predictions, I think Tesla is way too hard to forecast – and that ought to make investors at least hesitate. But even if the firm misses its 2025 targets, I think the story still has a way to go.
