Tesla (Nasdaq: TSLA) investors have been on a rollercoaster ride in recent months.
Since the stock gained around 90% after Trump’s election, Tesla shares have swung wildly due to declining sales, rising competition and CEO Elon Musk’s political controversies.
But despite the turmoil of the past few months, I believe Musk has an ace up his sleeve that could turn the company’s fortunes around practically overnight…
Tesla’s long-promised robotaxi business.
If the company can make good on its plans, I’m convinced its self-driving taxi network could redefine the company’s future.
This will shift investor focus from struggling EV sales to a new and potentially massive revenue stream.
Tesla’s Bumpy Ride
For much of the past few months, Tesla has been in a slump.
Sales have dropped, especially in key markets like Europe and China, where competition from companies like BYD, a Chinese EV company, is heating up.
The used Tesla market has also softened, and high-profile protests targeting Musk have put additional pressure on the brand.
But over the past weeks, Tesla’s stock staged a comeback…
Even as shares in other automakers dropped following Trump’s announced tariffs on imported cars and car parts.
Part of this is because Tesla makes all the cars it sells domestically here in the U.S. It’s the only car manufacturer that does.
But another major factor for this recent surge is Musk’s renewed commitment to Tesla.
On March 20, Musk held a surprise all-hands meeting where he reassured employees and investors that he would focus more on Tesla’s future and less on his role in the government.
Wall Street took notice, and over the next three days Tesla’s stock price shot up around 20%.
This surge was also helped by a short squeeze and speculation that the stock had been oversold.
TSLA settled at $263.55 a share last Friday, still up 18% over its low of $222 on March 10.
But that doesn’t mean Tesla’s problems are over.
Hundreds of “Tesla Takedown” demonstrations took place in the U.S., Canada and Europe over the weekend.
And with an expected 8% drop in global deliveries for the first quarter, some analysts are worried that the company’s sales slump could continue.
But perhaps the future of Tesla isn’t in car sales. That’s what Tesla bulls like Cathie Wood and Dan Ives believe.
Instead, they argue that Tesla’s future is in autonomous driving.
The Robotaxi Bet
I’ve been saying this for quite a while now too.
Of course, part of the reason is that Tesla has been talking about self-driving taxis for years. But 2025 might finally be the year when its robotax business takes off.
You see, Tesla’s biggest competitor in the self-driving taxi space is Waymo. It relies on expensive LiDAR sensors and operates in geofenced areas.
But Tesla’s approach is different. The company aims to leverage its massive fleet of existing vehicles equipped with Full Self-Driving (FSD) software, allowing owners to rent out their cars to the service when they are not using them.
That’s a win-win.
It provides Tesla with an instant fleet of taxis, while it potentially makes Teslas more valuable to their owners.
The company plans to launch its first robotaxi network in Austin, Texas, this June. And if Tesla can pull this off, it could be a game-changer for the company and the ride-share industry.
Analysts at ARK estimate that robotaxis could eventually generate 90% of Tesla’s profits, turning the company into a dominant force in autonomous mobility.
They also suggest that Tesla’s cost per mile could be 30% to 40% lower than Waymo’s, which gives them another instant advantage.
Source: Ark Invest
But the biggest advantage Tesla has over its competition is the massive amount of data the company collects from its autonomous vehicles.
Every day, Tesla collects around 10 million miles of FSD driving data from real-world conditions, compared to about 100,000 miles per day for Waymo.
This massive dataset could help Tesla refine its self-driving technology and scale its robotaxi business much faster than its competitors.
Of course, there are still big hurdles to overcome.
Tesla’s current FSD technology still requires a human in the driver’s seat, and that has to change for its robotaxi service to be truly autonomous.
At last week’s all-hands meeting, Musk said Tesla’s autonomous Cybercab will be in mass production by next year.
Image: Tesla
So that’s a step in the right direction. But fully driverless operation is still a major regulatory hurdle.
And there’s still the public perception issue. Tesla’s brand has taken a hit due to Musk’s political controversies, mostly centered around his work with the Department of Government Efficiency (DOGE).
Additionally, the anticipated weak first quarter sales report could spook investors, making it harder for Tesla to fund aggressive expansion plans.
Here’s My Take
Despite these challenges, Tesla’s robotaxi business represents a major opportunity.
If the company can prove that its self-driving technology is reliable and cost-effective, Tesla could transform into a leader in autonomous transportation.
Musk has always been about reinvention, as he most recently showed by turning Twitter into X. So reinventing Tesla as more than an EV manufacturer is on brand for him.
And I’m not the only one who believes this. Wall Street analysts like Adam Jonas believe that Tesla’s current struggles are just growing pains as it transitions into a broader AI and robotics company.
Remember, Musk is on record that robots could be a $10 trillion business.
But Tesla’s upcoming robotaxi launch in Austin will be its next critical test.
If it’s successful, it could shift investor sentiment and set the stage for a new era of profitability for the company.
If not, Tesla’s stock could take another hit.
Either way, 2025 is shaping up to be a pivotal year for Tesla — and for the future of autonomous driving.
Regards,
Ian KingChief Strategist, Banyan Hill Publishing
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