Robotaxi Unveil: A Make-or-Break Moment for Tesla Investors
Robotaxi Unveil: A Make-or-Break Moment for Tesla Investors
Today, much of the valuation bloom has come off the Tesla rose as the company is now worth around $550 billion, still 1.7 times more valuable than Toyota. However, this valuation is down significantly from Tesla’s all-time high of $1.2 trillion in November 2021. As slowing demand for Tesla’s vehicles has driven the company to announce multiple price-cutting initiatives, investors have taken notice and driven the company’s share price significantly lower.
With Tesla vehicle prices drastically falling, the company’s operating profit margin is now not only below that of Toyota but also lower than General Motors. Still, some investors believe Tesla retains some of its technology stock aura. Yet, when a company that produces cars and SUVs has margins that look like automotive margins, that company is probably just an automaker.
Elon Musk has repeatedly told investors that Tesla should not be seen as just an automotive company. Musk believes Tesla’s future is that of a technology company, with a significant part of its value coming from autonomous driving and related businesses. This is the bold bet that anyone holding or considering purchasing Tesla shares must also believe.
Tesla is a leader in the autonomous driving space - Jensen Huang, CEO Nvidia
During a recent earnings call, the CEO of the current artificial intelligence (AI) hardware corporate king, Nvidia, highlighted the burgeoning opportunities for AI and machine learning in the automotive industry. Jensen Huang sees the future automotive sector requiring the type of computational power offered by Nvidia that will drive growth in autonomous vehicles.
Huang specifically pointed to Tesla as a leader in the space. Tesla’s Full Self-Driving (FSD) system has been in development for years, with Musk frequently predicting its capabilities will soon reach a point where the company can deploy a fleet of robotaxis.
On August 8, Tesla has scheduled a “Robotaxi unveil” event. This event will significantly influence market perception of Tesla’s stock valuation. If Tesla can showcase substantial progress and demonstrate near-complete or complete FSD, it should boost investor confidence. A successful event would validate years of investment, development, and promises, positioning Tesla as a clear leader in autonomous driving.
However, the event carries significant risks. If Tesla fails to impress or the company cannot demonstrate meaningful progress, it will exacerbate doubts about the viability of its robotaxi ambitions. Even perceived setbacks or overpromises during the event will fuel investor and industry analyst skepticism.
Irrespective of the success of the Robotaxi unveil, Tesla also faces two important additional challenges that should be acknowledged:
1. Regulatory Barriers: Autonomous vehicles are subject to strict regulatory scrutiny. Obtaining approvals for widespread deployment in different regions can be a long and complex process.
2. Competition: Tesla is not the only player in the autonomous driving race. Companies like Waymo, Cruise, and others with deep pockets are heavily investing in autonomous technology as well. The lion’s share of robotaxi revenue may not go solely to Tesla if others successfully develop the technology as well.
For Tesla investors, August 8 is an important date. If the event is a success, it will provide a clearer picture of Tesla’s trajectory in autonomous driving. It’s important to remember there’s no need for fear of missing out (FOMO) investing. Investors have time to wait to see the outcome and the market’s reaction. The negative side of FOMO investing in Tesla today is that August 8 might prove that Tesla still has a long way to go in developing true robotaxi technology. In that scenario, Tesla is just another automaker unworthy of technology stock valuation.
Note: I acquired Tesla shares in November 2018. I sold all Tesla shares in May 2022.
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TaaSMaster, LLC is not a registered investment advisor or broker/dealer. All investment opinions expressed by TaaSMaster, LLC are from personal research and experience of the owner of the site and are intended as educational material. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors may occur.