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Tesla has been teasing autonomous robotaxis for years. CEO Elon Musk now says it’s just a few months away. With typical bombast of his, he claims that converting the company’s electric fleet to autonomous vehicles could be “the largest asset value appreciation in history.” However, Tesla’s self-driving software still requires drivers to keep their hands on the wheel and their eyes on the road. It’s a stretch to imagine that robotaxis could change the company’s fortunes this year.
Musk presided over the company’s latest quarterly earnings conference call with a mixed message. If you look at the company’s spending decisions, it seems as if everything is aimed at addressing the problems 13 percent drop in automobile sector revenues. Tesla is cutting prices on existing vehicles in a bid to reverse falling sales and planning cheaper models next year. To cut costs, it will lay off 10 percent of its workforce.
However, if you listen to what Musk says, it seems that Tesla’s main concern is its expensive autonomous driving project. Earlier this month, Musk wrote on X: “Tesla Robotaxi will be unveiled on 8/8.” On Tuesday he showed off plans for a ride-hailing app.
There are no details on regulatory approval or launch. The focus on robotaxis appears to be an attempt to divert attention from falling sales. Inventory is piling up. Tesla has 28 days of unsold supply, up from 15 days last year. This may be related to increased competition and reduced US government subsidies, two factors that Tesla has no control over. But Musk’s determination to engage in online political fights hasn’t helped. If the United States raises interest rates again this year, higher auto financing costs could further dent demand.
The highs of late 2021, when Tesla was a trillion-dollar stock rushing to ramp up production, seem distant. Free cash flow has turned negative for the first time in four years. Executives are leaving and the stock is down more than 41 percent so far this year.
Still, this does not constitute a complete requalification. Tesla’s enterprise value is still many times greater than that of automakers like Ford. Investors seem willing to give Musk the benefit of the doubt. The stock price rose in after-hours trading following news that Tesla was planning more affordable vehicles next year, even though the company chose not to confirm a date for its planned $25,000 model. Short interest is below 4 percent, down from around 20 percent in 2020. Tesla has dug itself out of bigger holes than this in the past. But for this you need cheaper cars, not robotaxis.