Volatility has been widespread in recent months, but the Tesla (NASDAQ:TSLA) share price has been exceptionally choppy. In fact, the company’s market cap peaked at $1.54trn in December, and has since fallen below half that figure. Just take a minute to think about the sheer flow of capital in and out of the stock. It’s astonishing.
Why is 2025 so important for Tesla?
2025 is turning into a significant year for Tesla. It’s a year that’s already marked by both challenges and bold ambitions. First, the company is facing its steepest decline in vehicle deliveries to date, with sales plunging 13% in the first quarter. That’s its largest drop ever. Tesla delivered 336,681 vehicles in the first three months of 2025, down from 386,810 a year earlier. What’s more, it saw a staggering 49% fall in European sales in January and February, even as the EV market on the continent grew. This downturn is attributed to growing competition, a backlash against CEO Elon Musk, and public protests, all of which have dented Tesla’s appeal and market share.
Despite these setbacks, 2025 is also the year Tesla needs to deliver on its future value-drivers: autonomous vehicles and robotics. The company continues to make progress in Full Self-Driving (FSD) technology, with its vehicles now autonomously navigating factory lots and accumulating over 50,000 driverless miles between its California and Texas facilities. Tesla is also preparing to launch its first Robotaxi network. It aims to be the first to offer a generalised, pure AI solution to autonomy, which could redefine urban mobility and transportation economics.
Equally transformative, but often overlooked, is its push into robotics. The company plans to produce 10,000 Optimus humanoid robots this year. They’re initially for factory use but with ambitions for broader industrial and commercial deployment. Robotics is arguably the next big tangible development in artificial intelligence (AI) and Tesla believes it can lead, with the company targeting a sub-$20,000 price point as production scales.
It won’t be easy
My concern with the Tesla valuation, which is around 100 times forward earnings, is the assumption that the company can execute its plans flawlessly. It’s worth remembering that Waymo, owned by Alphabet, is already operating its robotaxi fleet in five locations around the US. Additionally, Chinese carmakers are also developing their own autonomous vehicle projects. Tesla’s non-LiDAR (vision only) approach will have to outperform its peers if the company is going to truly dominate.
And with regard to robotics, I need to see more to believe adoption is going to be game-changing. The latest update video, released in April 2025, shows Optimus walking with a much more human-like gait. This is thanks to reinforcement learning rather than hand-coded choreography. The robot now weighs 138 pounds and is powered by a 2.3kWh battery using Tesla’s high-density 4680 cells. It can operate for 8-10 hours continuously, recharging itself autonomously in just 10 minutes.
As has long been the case, I want Tesla to succeed. However, I’m struggling to put my own money behind it. If it fails to execute, this expensive stock could tank.
