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This week, Tesla (TSLA) will hold its “We, Robot” robotaxi event on Oct. 10 in Los Angeles. It will be a key event for Tesla, whose CEO Elon Musk believes that the bulk of the company's mammoth valuation comes from software products, especially autonomous driving.
The unveiling was previously scheduled for August, but the company delayed the launch after Musk said Tesla needed to “make some important changes” and show off a “couple of other things” at the event.
Thanks to its rally over the last few months, Tesla stock has briefly turned green on a year-to-date basis on a few occasions, but the stock has struggled to hold onto positive territory for 2024 - even as Tesla has surged over 76% from its April lows.
Some of the recent strength can be attributed to the robotaxi unveiling, which a Barron’s article described as a “make or break event” for both Tesla stock and its billionaire CEO. Here’s what markets are expecting from the event, and whether TSLA stock can rise higher following the unveiling of its long-awaited robotaxi.
Will Robotaxi Day Be a Key Driver for Tesla Stock?
While I won't go to the extent of terming the robotaxi event as a “make or break” event for Tesla, it is undoubtedly among the most important events in the company’s history. Musk has been talking about robotaxis for years, and even predicted that there would be a million on the roads by 2020.
As we know, that wasn’t the case - but Musk seldom shies away from forecasting big numbers. In the automotive business, he once touted a long-term delivery growth of 50% and a goal of reaching 20 million annual deliveries by 2030. The company has since officially dropped the 2030 delivery goal, and virtually given up on the 50% delivery growth target after missing it for three consecutive years.
Cut to 2024, and markets are no longer discussing whether Tesla’s deliveries will rise by 50% this year, but rather whether they will rise at all. The company’s deliveries fell YoY in the first half, and while they did increase 6% YoY in Q3, shipments are still down YoY in the first nine months of the year.
TSLA is Struggling with Both Deliveries and Margins
While Musk previously expressed confidence that Tesla’s deliveries would rise YoY in 2024, if that doesn't happen, it would be the first time in history that the electric vehicle (EV) giant’s deliveries have declined on an annual basis.
Tesla’s industry-leading margins have also withered away, as it lowered prices to spur sales. While these price cuts might have prevented an even worse performance on shipments, they came with a heavy price in terms of margin compression.
In my view, that makes Tesla’s robotaxi unveil all the more important, as the company’s automotive business – which, despite all the debate about Tesla being a tech company rather than a carmaker, still accounts for the bulk of its revenues – is not expected to turn around in a major way anytime soon, unless the company does something out of the box.
What to Expect from Tesla's Robotaxi Day
There is no clarity over what Tesla might showcase at this Thursday's event, but it's likely to include more than robotaxis, given the “We, Robot” title.
Naturally, there are expectations that the “Cybercab” – built specifically for ride-hailing – will be unveiled at the event, and Musk has touted the possibility of demo rides. Some market-watchers also expect Tesla to unveil its low-cost model on Thursday.
Meanwhile, veteran tech analyst Gene Munster believes that Tesla will unveil not two, but three vehicles at the event, with a Cybervan also on his bingo card. The Deepwater Asset Managing Partner said that he expects Tesla to only announce the production timeline for “Model 2,” which is the low-cost model that Musk has been teasing for so long. However, Munster notes that comments around the production timeline so far suggest that the low-cost offering may turn out to be a “stripped down Model 3,” which would be a negative for Tesla stock.
Munster also expects Tesla to make some announcements about the Optimus humanoid, which Musk has said could add $25 trillion to Tesla’s market cap - a figure that's higher than all of the major automakers put together.
“While I believe there will be updates to Optimus, and potential talk of an expanded family, those announcements are related to products that likely won’t see availability for at least five years, more likely a decade,” said Munster.
Should You Buy or Sell Tesla Stock Ahead of the ‘We, Robot' Event?
I believe the “We, Robot” event remains a wild card, considering the wide range of expectations surrounding the event. However, none of the expected announcements - apart from the low-cost model - have the potential to move the needle for Tesla’s earnings in the next couple of years.
As for the robotaxi, the autonomous vehicle (AV) industry is still in its infancy and is mostly in the news for the wrong reasons – Alphabet (GOOG)-backed Waymo's robotaxis honking furiously in a parking lot, for instance. Also, Tesla has to spell out a business model for the segment, including whether it will enter into partnerships with ride-hailing companies like Uber (UBER).
Finally, profits would still be a tall ask from the robotaxi business, as incumbent players like Waymo and General Motors' (GM) Cruise division are still leaving a hole in their parent companies’ profits.
Overall, while I won't bet on the upcoming robotaxi event, I continue to believe that Tesla could be among the most consequential companies of our times with its multiple innovative products, and would use any dip to add more shares.
On the date of publication, Mohit Oberoi had a position in: TSLA , GOOG , GM . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
