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Robotaxis are not the solution to Tesla’s problems
Elon Musk sends confusing message on earnings call
 Free cash flow at Tesla has turned negative for the first time in four years © Getty Images
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Tesla has been teasing self-driving robotaxis for years. Chief executive Elon Musk now says they are just months away. With typical grandiloquence, he claims that turning the company’s electric fleet into autonomous vehicles could be “the biggest asset value appreciation in history”. Yet Tesla’s autonomous driving software still requires drivers to keep their hands on the steering wheel and their eyes on the road. It is a stretch to imagine that robotaxis can turn the company’s fortunes around this year.
Musk presided over the company’s latest quarterly earnings call with a confusing message. Look at the company’s spending decisions and it seems as if everything is targeted towards addressing the 13 per cent drop in automotive revenues. Tesla is cutting existing vehicle prices in a bid to reverse the fall in sales and planning cheaper models next year. To reduce costs, it will lay off 10 per cent of its workforce.
Listen to what Musk says, however, and it sounds as if Tesla’s main concern is its expensive autonomous driving project. Earlier this month, Musk wrote on X, “Tesla Robotaxi unveil on 8/8”. On Tuesday it showed plans for a ride-hailing app.
There are no details on regulatory approval or rollout. The focus on robotaxis seems an attempt to draw attention away from falling sales. Inventory is piling up. Tesla has 28 days of unsold supply, up from 15 days last year. This may be connected to rising competition and the reduction of US government subsidies, two factors over which Tesla has no control. But Musk’s determination to engage in political fights online has not helped. If the US raises interest rates again this year, higher car financing costs could further dent demand.
The highs of late 2021, when Tesla was a trillion-dollar stock rushing to scale up production, feel far away. Free cash flow has turned negative for the first time in four years. Executives are departing and the stock is down more than 41 per cent in the year to date.
Still, this does not constitute a full re-rating. Tesla’s enterprise value remains many times the size of carmakers like Ford. Investors seem keen to give Musk the benefit of the doubt. The share price rose in after-hours trading following news that Tesla was planning more affordable vehicles next year, despite the company opting not to confirm a date for its anticipated $25,000 model. Short interest is below 4 per cent, down from about 20 per cent in 2020. Tesla has climbed out of bigger holes than this one in the past. But to do that it needs cheaper cars, not robotaxis.
elaine.moore@ft.com
Copyright The Financial Times Limited 2024. All rights reserved.
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The real greybeard
37 minutes ago
Judging by the comments Musk definitely has a polarizing effect.
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Quantum says
58 minutes ago
Tesla are refusing to take older model 3’s as trade ins by offering ridiculously low values thereby sabotaging customer loyalty.
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Carthorsepower
1 hour ago
On the call Musk stated that if you don't think Tesla can solve the automation problem then you shouldn't invest in the company. He's actually giving good advice here.
He doesn't care about the fundamentals of car manufacturing or pricing - even though that's where virtually all of Tesla's revenues come from. It's automation or nothing and automation isn't going to arrive anytime soon, if at all
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EU/British entrepreneur - companies in EU, UK, USA
1 hour ago
He’s also picking fights with the governments of Australia and Brazil. Musk should go and live in an anarcho-syndicalist commune on a ship with his bat sh@t crazy tech bro libertarians and see how they get on without the protection of all those institutions they are so keen to undermine.
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Bitcoin Bro Crusher
3 hours ago
“A demagogue is one who preaches doctrines he knows to be untrue to men he knows to be idiots,”
—H.L Mencken
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Southwest Economist
6 hours ago
It is a near certainty that Tesla Robotaxis will end up like GM Cruise or Boeing. Getting them on the road will be easy (thanks to forum shopping with state and local governments eager to be seen as innovators). Keeping them there will be not.
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MMM111
6 hours ago
Despitewhat what the press likes to say. A lot of the issues facing Tesla are market/ environment issues- outside their control.
One bad quarter does not change the long term outlook of this company, nor does one bad year.
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Maru Kun
3 hours ago
In reply to MMM111
Choosing to alienate a significant part of your customer base by engaging in endless, tedious culture wars while making yourself look deranged in the process was very much in Musk's control.
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Carthorsepower
58 minutes ago
In reply to MMM111
Having a very tired line of models and throwing all your efforts into launching something as dumb as the Cybertruck is totally in Tesla's hands
He's promised new models (without giving any detail) that'll be made on existing production lines. That's just cosmetic tweaks then - they're not actually new if the lines aren't retooled. The EV market is driven by novelty (which isn't healthy at all) and Tesla's are starting to date.
But in one way you're right. One quarter doesn't change the fact that Tesla was always overvalued in relation to what it can actually ship, as opposed to the vaporware Musk often launches.
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Rwuw
6 hours ago
He’s clutching at straws as the China deals have collapsed and it’s a matter of time , no price cuts will save Tesla now and the so called $25k car will be his last hoorah at trying to salvage a sinking ship , that is why veterans have upped and left and Robotaxis is called taking to much KET watching sci fi movies , next he will tell you he’s developing a beam me up Scotty platform for travel.
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JWUK
7 hours ago
No discussion at all about battery storage or humanoid robot.
“It’s a car company” etc etc.
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Bitcoin Bro Crusher
2 hours ago
In reply to JWUK
Yes, amigo, Tesla is a car company, and anybody who believes otherwise is a ??.
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Carthorsepower
1 hour ago
In reply to JWUK
He stated on the call that the Semi will be in production in 2027 - 10 years after his first "next year" statement about it. There's no guarantee it'll even exist then - I'd expect the same with Optimus. In some things Musk is consistent
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