Key takeout
Tesla investors on Tuesday were ahead of their hopes of becoming EV Maker’s next growth driver last week with a feud between CEO Elon Musk and President Trump.
Tesla (TSLA) shares rose Tuesday, nearly 6% for the third day in a row, with a big profit growth of nearly 6% in anticipation of the launch of the Robotaxi service in Austin, Texas. The company will operate 10-20 vehicles starting this week and will grow its fleet in the coming months.
A Goldman Sachs analyst said in a memo on Tuesday that it could have two advantages in the AV market. First, the size of your existing business and the choice of specific designs (Tesla uses custom silicon and cannot navigate using Lidar or radar, but the vehicle can be significantly cheaper than its competitors. Second, its “end-to-end AI training approach” can facilitate faster scaling by creating adaptive software that uses inference rather than programming to understand the new environment.
Musk expects rapid and massive expansion
Tesla has set aggressive scaling goals for the AV business. The company is expected to enter the market beyond Austin by the end of the year, with CEO Elon Musk expecting to have “hungry thousands” of AVS on the road by the end of next year. Tesla expects its operating costs for scale to be around 40 cents per mile.
Goldman Sachs has more modest expectations. The company currently estimates the average AV depreciation, insurance and remote operator costs at a miles per total of about $1.34, and does not expect these costs to fall to 40 cents until around 2040. Tesla expects about 2,500 Robotaxis to be used by the end of 2027.
Goldman doesn’t just think Tesla’s target is unrealistic. Baird downgraded Tesla stock on Monday, citing “loud expectations” as the main reason. “I consider Musk’s comments about Robotaxi’s ramp rate a bit too optimistic, and I believe this excitement is putting a price on the stock,” wrote research analyst Ben Kallo.
A highly anticipated launch
There are many things about the success of Tesla’s Robotaxi service. Musk has been arguing for more than a year that Tesla’s core business is AI and robotics, not cars. The company began production of the Dojo Supercomputer in 2023, and in 2024 it began prioritizing its Robotaxi services over developing low-cost, human-driven EV models.
Robotaxi’s rollout predictions have supported Tesla’s stock price despite the troubles. Sales fell in the first quarter amid growing competition and consumer backlash against Musk’s work with the Trump administration. Stocks lost more than half of their value to reach an all-time high when the stock plummeted after Trump announced sudden tariffs on most commodities around the world.
Stocks recovered in late April and May after Musk promised to spend less time in Washington. However, the stock received another hit earlier this month when Musk and the president were throwing online about the potential impact of a tax bill they are working on through Congress on the US budget deficit. Public spats have put Musk’s friendly relationship with President. This was an important reason many Tesla investors saw past weak sales and uncertain outlook.
Deepwater Research’s Gene Munster and Brian Baker said last week they didn’t expect the Musk feud with Trump to derail Tesla’s AV leadership. The White House “lives little to stand in front of autonomy,” they said, given the competition between the US and China is a global leader in artificial intelligence. “The bottom line expects (we) cooler heads to win, and the federal government continues to support the growth of these services.”
