Hi everyone!
The last time I looked at Tesla in detail was right after their Cybercab launch in October 2024 when their stock price had dropped from $245 to $219 immediately after... and obviously so much has changed...
The stock price obviously recovered from the Cybercab launch and even rose to a high of $428.22 back in January a couple of days before Trump took office.
Let's look at the stock price today:
Apparently that dramatic drop two days ago was from Elon starting the America First political party.
I can understand the market's reaction. Tesla's production and sales are lower this year compared to previous years, because the people buying Tesla vehicles were left-leaning and cared about the environment (and have higher than average disposable income)... and Elon buying Twitter, donating nearly $300M to Trump and then running DOGE killed a lot of that goodwill and demand. Trump tried to help by encouraging his supporters to buy Teslas (it hasn't be enough to undo the demand destruction) and now Elon is openly defying trump supporters... leaving not a lot of people in the US that want Tesla vehicles.
The most profitable vehicles for Tesla were Model Ys and Model 3s that were made in China but shipped to the EU. However, Elon's politics (including endorsing far-right parties in the UK and Germany) have caused sales to be done 45% in Q1 2025 despite EV sales increasing overall.
In China, BYD is relentless gaining market share.... the have a huge range of EVs, including incredibly cheap offerings and lots really exciting new models.
BYD's "God's Eye" system is apparently comparable to Tesla's FSD (Full Self Driving) but it's free. Tesla is currently selling FSD as an $8K USD additional add on. The Chinese EV market is innovating so quickly, and Tesla just isn't putting the R&D effort in to update their vehicles.
The bizarre thing to me is that the $TSLA spiking from $300ish to $312ish on the 2nd of July is because the Q2 deliveries were announced. They were down 13.5% from last year to 384,122 (2024Q2 was 443,956) but the shares rose because people thought the numbers were going to be way worse. (Source) Bonkers!
So, why would Elon upset Trump supporters after already upsetting his existing customers? It's because Trump's OBBB cuts:
- Tax credits for EVs ($7,500 federal customer credit)
- EV Regulatory Credits (the money Tesla got from Ford, GM and Stellantis)
- Manufacturing credits
- Charging Credits
- Solar Residential Credits
Biden's IRA bill had a ton of credits to encourage sustainable energy and products, and Trump is trying to eliminate all of it.
On top of all of the above, the tariffs on China (30%) affect Tesla's supply chain, particularly the Megapack batteries.
In 2025 Q1, Tesla would have lost money from automotive sales (Gigafactories are extremely expensive to run) but they were profitable because of the $595 million in Regulatory Credits that they sold. They're now gone. There might be some credits available in the EU, but again, Tesla sales have dropped dramatically compared to 2024.
I do think that the credits is why Tesla has been producing way more 3/Ys than they've been delivering... they can sell credits on cars they've built, not cars they've sold...
... but this means that they have so many cars built that they may not be able to sell. Apparently they're just sitting outside in carparks all over America Source.
In some good news for Tesla, they delivered 336,681 vehicles globally in Q1 and 384,122 vehicles globally in Q2. That's 50,000 more vehicles, and likely due to the Model Y refresh named Juniper. It'll be interesting to see if the Juniper grows sales for the Model Y over time.
My guess is.. it will not.
Tesla needs real innovation in its vehicles to compete with all the incredible EV offerings coming out of China and Europe (and honestly the US with Rivian and Slate).
Tesla's Energy division has made great gains the last couple of quarters, I've been legitimately surprised with their progress... but unfortunately Trump's OBBB makes future profitability a lot harder - not impossible, but harder.
Tesla has delayed the promised 'cheaper EVs' (which I don't believe they ever took seriously) and has now gone entirely all in on Robotaxi, Cybercab and Optimus... but I have issues with those too.
Robotaxis
Robotaxis recently launched with safety personnel in the passenger seat in a small geofenced area of Austin, Texas to influencers for the ride price of $4.20. There's been some hiccups (like driving into a parked car) but I don't think its been too dissimilar from Waymo's first year.
However, from Sept 1 2025, Texas will only allow Level 4 autonomous vehicles, Tesla's FSD is only level 2 so they won't be allowed to continue the geofenced Robotaxi trial in Austin.
The problem I have with Robotaxis is the profitability of it.
Elon claims that once they reach Level 5 automation with FSD, they'll have millions of vehicles ready to be Robotaxis, but that isn't true for a number of reasons.
1.) Most Tesla vehicles have older hardware that can't run the latest versions of FSD, and upgrading those vehicles will cost literal billions.
2.) It seems impossible to reach Level 5 autonomy without Lidar and other sensors. I just don't think you can drive in harsh sunlight, fog, rain, Wile E Coyote drawn tunnels, etc with just cameras. The roads are too chaotic and stakes are too high to operate without redundant safety features.
3.) I am genuinely convinced that road-mapping is required to operate robotaxis. Waymos roll-out is location by location and they map the city out before they launch.
So... in the likely scenario that Tesla doesn't just flick a switch and turn a bunch of owner's vehicles into Robotaxis overnight, Tesla can still launch its own Robotaxis and Cybercabs instead.
I'm just not sure it'll be profitable.
They'll have to compete to rides with Uber, Lyft, Waymo, taxis and public transport. It's a crowded market.
People genuinely prefer to own their own cars, even though the average cost of car ownership in the US is about $12K a year, and not wait around for their rides to appear. I personally prefer to be in control... and I'm unlikely to be alone in this...
Maybe this will change over time... but currently only 13% of drivers trust self-driving vehicles. Tesla might have to change drivers attitudes and culture-itself for this venture to be profitable.
Uber had a revenue of $44B with a profit of $1.8B. Lyft has not consistently been profitable. Waymo has not been profitable.
Uber makes $1-$2 per mile and takes 50%, but the drivers cover all the maintenance and cleaning costs. Tesla wouldn't need to pay a driver but would own all the vehicles themselves, they'd also need staff and warehouses in every city to clean and charge the vehicles regularly.
I'm not sure if Tesla could ever be profitable with this venture, and if they could, surely it'll take years. I'm not even sure that Waymo will be profitable anytime soon, if ever.
One thing I do wonder is if robotaxis will face constant regulatory hurdles because while they might decrease parking, they'll definitely increase traffic in the cities they operate.
Say you have a city where most of the commute is workers driving into the city in the morning and out of the city at nighttime. If you can convince all those drivers to become Robotaxi riders, then instead of parking in the city, those taxis drive into the city, drop someone off, drive out to pick someone else up, drive back in... the driving in and out effectively doubles the traffic. If the outs don't interact with the ins, then everything is fine... if they do then traffic has become even more of an issue than it already was.... traffic is already so frustrating, I can't imagine doubling it... and an easy fix for a city could be to just ban robotaxis, or tax them so they'll less appealing (if they can offer a price that comes close to the comparison of ownership).
So no... I do not think Robotaxis or Cybercabs will be profitable for Tesla, definitely not anytime soon.
Optimus
It's a gimmick.
The problem is that robotics are incredibly powerful when designed for a very specific task...
... but creating a general humanoid robot means you have to solve for every single problem - even if the robot never faces those issues. If you carry a heavy box, you're able to adjust your center of gravity to accommodate for that box, and you adjust it constantly if you are turning corners or going up stairs or down stairs or whatever. That is incredible hard for robots to do. There are lots of box carrying robots on the market already, they're good at that specific thing.
Think about your wrist, your hips, your shoulders, your ankles, they're all incredible joints that are so hard to replicate in robotics. If you carry a heavy bucket of water, think about how you adjust your gait to move your leg around the bucket... humans are amazingly adaptable. Think of the sensitivity needed to pick a strawberry... you have to adjust your fingers so that you pull it off the vine without squishing it.
Optimus will likely be able to do a couple of tasks well... but I think we're decades away from a robot that can do everything humans can do physically, if its ever possible. I don't think factories are going to want humanoid robots when specific-task robots will be so much cheaper... and who knows how much Optimus will cost once if they can figure out how to make it in a way it can do unlimited tasks?
I'm not a luddite at all... I think robots have incredible use cases, from a pure stability point of view I think this guy is ultimately way more useful...
So... to recap... Tesla was only profitable last quarter because of the credits, which are now gone. They're selling less vehicles than last year. The OBBB hurts their vehicle and megapack business, as do the tariffs. Demand is down because Elon upset people on both the right and the left in the US and Europe. Robotaxia and Cybercabs may never be profitable or will at least take years to be. A general humanoid robot is multitudes more complex than purpose-built robots.
$TSLA is dramatically overpriced for this moment... it's priced in promises that Tesla won't be able to keep.
I'm definitely nervous for all the retirement funds that are heavily invested in $TSLA. It's going to get rocky...
Thanks for reading! Let me know what you think I might have right or wrong.
