Musk’s Pivot to Robotaxis and AI

By Evans Momodu
Published 17:05 UK GMT


In 2021, Tesla reached a valuation of $1.2 trillion due to the success of the Model 3 and Model Y, proving EVs could be mass-produced profitably.

However, Musk abandoned plans for a lower-cost $25,000 Model 2, instead shifting Tesla’s focus to robotaxis and AI-driven mobility.

This pivot initially excited investors, causing Tesla shares to jump 71% between April and November 2024, despite weakening EV demand.

The rally accelerated post-election, as Musk’s support for Trump led analysts to speculate that regulatory barriers for robotaxis might ease.

Musk insists Tesla will launch autonomous ride-hailing services in Texas by June 2025, but scepticism remains:

• Many U.S. states already allow self-driving cars with little regulation, meaning Trump’s policies may have limited impact.

• Texas has minimal restrictions, yet Musk’s self-driving cars still aren’t ready for mass deployment.

• Waymo (Alphabet’s autonomous vehicle subsidiary) dominates the robotaxi market in cities like Los Angeles and Phoenix.

Unlike competitors that use radar and lidar technology for safety, Tesla relies solely on cameras and AI, raising concerns over reliability and safety. Tesla’s Autopilot and Full Self-Driving (FSD) systems have faced multiple lawsuits and federal investigations into accidents and fatalities.

EV Sales Declines while Competition Rises

Tesla’s core EV business is weakening due to the following factors:

• The Cybertruck launched in 2023, but only 38,965 units were sold last year, far below Musk’s 250,000-unit 2025 goal.

• Models 3 and Y are aging, leading to price cuts amid slowing EV demand.

• Chinese EVs, particularly from BYD, are dominating with prices starting below $10,000.

• Tesla’s sales have dropped sharply in Europe, following Musk’s alignment with far-right political figures.

Even Trump’s election, which initially boosted Tesla’s stock, now poses a potential threat: Trump has criticised EV subsidies and may push for policies that disadvantage Tesla while benefiting traditional automakers.

Financial Metrics: Is Tesla Still Overpriced?

Tesla continues to trade at massive premiums compared to other automakers and even major tech firms:

• Tesla’s forward price-to-earnings (PE) ratio is 9 times higher than the top 25 automakers.

• It is quadruple that of BYD, which outsold Tesla in global EV sales in 2024.

• Tesla’s PE ratio is higher than Nvidia, Apple, Meta, Alphabet, Amazon, and Microsoft—the other members of the “Magnificent Seven” tech stocks.

Tesla’s Future Hinges on AI and Robotaxis

Despite financial concerns, many investors remain optimistic, believing Tesla will dominate autonomous ride-hailing and robotics:

• Ark Investment Management predicts Tesla’s stock will reach $2,600 by 2029, with robotaxis contributing 88% of Tesla’s value.

• Morgan Stanley projects that 39% of Tesla’s future value will come from AI-based subscription services.

• Tesla’s humanoid robot, Optimus, is another speculative area where Musk claims Tesla will surpass all competitors.

The Road Ahead for Tesla

• Trump’s policies may influence Tesla’s future, but his regulatory stance on EV subsidies and automation remains unclear.

• Competition from China’s BYD and Alphabet’s Waymo continues to grow.

• Tesla’s ability to deliver fully autonomous vehicles remains uncertain, despite Musk’s repeated claims.

• Musk’s leadership and political distractions raise questions about Tesla’s strategic direction.

Tesla’s stock may remain inflated by optimism, but its real-world performance, growing competition, and regulatory uncertainty could challenge its long-term dominance in the EV and AI markets.
Source: Reuters
Image: AOL