Last Update04 Jul 25Fair value Decreased 6.53%
Revised Update.
Market Misreads Tesla Again, but the Strategy Is Working
Investor sentiment around Tesla has taken a hit recently, driven by headlines about Elon Musk’s political fallout and concerns over potential changes to US EV subsidies. But the reality behind these stories is far less dramatic than it seems.
The idea that the US government might stop offering EV subsidies is not new. In fact, Musk has consistently said Tesla doesn’t need them. As early as 2017, he told CNBC he would prefer to eliminate all subsidies, and he has repeated this view in multiple interviews since (Quartz, Politico, Teslarati, , Reddit).
The political drama, including the recent fallout with Donald Trump, is also overstated. It might generate headlines, but I don’t believe it has any material implications for Tesla’s business. As investors, we should stay focused on what matters: execution.
More importantly, my valuation model never relied on government support. These risks were known well in advance and already priced into the long-term thesis. Anyone reacting now is responding to noise, not fundamentals.
The Real News: Robotaxi Is Live and It Works
On June 22, Tesla launched its first paid robotaxi service in Austin, Texas. While still early, it was a clear success.
The fleet currently operates within a geofenced area using modified Model Ys. Rides are priced at $4.20, require an invite, and include a front-seat safety monitor. Early user feedback suggests the system is smooth, reliable, and rapidly improving.
This is more than just a pilot. It is proof of concept for Tesla’s vision: software-powered, scalable autonomous mobility with zero marginal labor cost.
What makes this rollout different:
- While Tesla’s initial deployment is geofenced, it is designed to scale beyond fixed zones. Unlike Waymo’s lidar-based approach, which relies on high-definition maps and pre-mapped areas, Tesla is building toward generalised autonomy using AI.
- Tesla’s entire stack is vertically integrated: hardware, software, chips (Dojo), and data
- No lidar, no reliance on HD maps. Just vision, neural nets, and billions of miles of driving data
- Tesla’s vehicle cost is roughly one-seventh that of a Waymo robotaxi, which uses a Jaguar base vehicle layered with expensive external sensors. This makes Tesla’s model far more scalable and profitable in the long run.
If Waymo wants to seriously compete, it may eventually need to design and manufacture its own purpose-built robotaxi. But by the time they do, Tesla could be too far ahead.
Ask ChatGPT
Tesla Is Executing
Tesla’s recent Q2 production and delivery results are another clear sign of solid execution. With over 410,000 vehicles produced and a meaningful recovery from Q1, the company continues to deliver at scale despite tough macro conditions. The energy segment, typically volatile, held steady at 9.6 GWh deployed, flat year-over-year but a sign of growing consistency. Tesla also delivered more vehicles in Australia in one month than Lucid did globally across the entire quarter, highlighting its dominance. Meanwhile, the robotaxi pilot in Austin has likely already completed over 1,000 rides. Tesla is now quite literally transporting paying customers with autonomous vehicles. While competitors like Ford scale back their EV efforts and startups like Rivian and Lucid remain far behind, Tesla is quietly doing the hard work, executing at scale and pushing toward autonomy and robotics.
Institutional conviction is also starting to shift. William Blair recently projected Tesla will capture one third of the 1.4 trillion dollar robotaxi market, estimating annual revenue of 250 billion dollars from autonomy alone. In their model, 300 dollars of Tesla’s valuation per share comes purely from the robotaxi business, with energy and auto accounting for just 60. Analysts at Canaccord also highlighted the vulnerability of incumbents like Uber and Lyft, noting that Tesla’s ability to scale robotaxis overnight, thanks to 2.8 million compatible vehicles already on the road, is a unique strategic advantage. And while the current pilot in Austin is small, Tesla's use of supervised FSD shows that the core technology is functional and improving rapidly. Elon Musk expects to move to a 3 to 1 vehicle to operator ratio within months, and Dojo is scaling fast with over 60,000 H100 equivalent GPUs already active.
Wall Street is beginning to understand the scale of the opportunity, but I believe many analysts still underestimate the timing. Most see Tesla’s transformation into a robotics and AI company as a 2030s story. I think it will happen much sooner. Based on my valuation model, the robotaxi rollout, combined with Tesla’s ability to scale autonomy quickly and deploy Optimus into factory operations, points to an acceleration that will surprise the market. The real alpha lies not in recognising what Tesla will become, but how quickly it will get there.
At this point, it's less about whether the thesis is real and more about timing. Many institutional investors are already convinced of the destination but remain cautious about the timeline. If Tesla moves from 11 to 1,500 or more robotaxis in the next few quarters, that inflection point could arrive fast, unleashing the wall of institutional money waiting on the sidelines. In that case, the shift from auto to autonomy will not only be real, but also fully recognised by the market.
Tesla’s True Nature: A Robotics and AI Company
Tesla is not just disrupting cars. It is quietly building a robotics company hiding in plain sight.
Dojo is being scaled to train both autonomous driving and robotic control systems.
Optimus, Tesla’s humanoid robot, is already performing real-world factory tasks. A Gen 3 version is expected by year-end. Musk recently stated that Optimus could be Tesla’s most valuable product line, eventually surpassing auto and energy in revenue and impact.
This convergence of hardware, AI, energy, and automation is what positions Tesla alongside companies like Nvidia, not Ford or GM.
One Word of Caution
While the long-term thesis remains intact, and is in fact playing out as planned, it is important to acknowledge that much of this is already priced in.
The market does believe in Tesla’s future. So from a valuation perspective, it is not the screaming bargain it once was.
If you believe in the Tesla vision, it makes sense to hold or accumulate on weakness, but this is not the time to chase rallies.
Overview
Founded in 2003, Tesla Inc. (NASDAQ: TSLA) began as an ambitious EV startup led by engineers Martin Eberhard and Marc Tarpenning. Elon Musk joined as an early investor in 2004, spearheading Tesla’s first major funding round and later taking over as CEO. Under his leadership, Tesla introduced the Roadster in 2008, followed by Models S, X, 3, and Y—bringing electric vehicles into the mainstream.
Today, the dominant media narrative paints Tesla as an automaker in decline—citing Elon Musk’s political controversies, rising Chinese competition (BYD, Nio, etc.), and anti-Tesla activism. At first glance, these concerns seem like major headwinds for investors.
However, Tesla is not just an automaker—it is in the process of evolving into a technology company spanning AI, robotics, and mobility services. This transformation, much like Nvidia’s shift from GPUs to AI computing, is unlocking new revenue streams that could redefine Tesla’s valuation. The real question is: Is Tesla struggling, or is this an opportunity to invest in a tech giant in the making?
If successful, this evolution could position Tesla as one of the most valuable companies in the world within the next decade.
The Tesla Transformation: More Than Just an Automaker
Tesla is undergoing a transformation that extends far beyond its roots as an EV manufacturer. The company is methodically constructing an ecosystem that spans AI, robotics, energy, and autonomous mobility—creating an entirely new paradigm for technology-driven industry disruption.
Elon Musk highlighted Tesla’s ambitious vision for sustainable abundance, where AI and robotics revolutionize productivity. He emphasized that Tesla is not just improving transportation but enabling an era where "any good or service can be available at will." This vision rests on three major pillars:
- AI & Automation – Tesla’s AI advancements, driven by Dojo, position the company as a major AI player. Musk noted that Tesla’s Cortex One training cluster, alongside Dojo, is scaling rapidly, with over 50,000 GPUs active today and set to double soon.
- Autonomous Mobility – With 10 million Tesla vehicles on the road by next year, Tesla can activate autonomy overnight, turning a massive fleet into an on-demand robo-taxi network.
- Robotics – Optimus is set to scale, with Tesla targeting 5,000 units this year and 50,000 next year. Musk believes humanoid robots will be Tesla’s biggest product ever, dwarfing the auto business.
Current Business Model
Tesla operates a vertically integrated model across multiple industries:
- Automotive
- Sales – Direct-to-consumer EV sales through Tesla’s online platform, eliminating traditional dealerships and increasing margin control. In 2024, automotive sales generated approximately $77 billion, accounting for 79% of Tesla's total revenue.
- Automotive Services – Tesla operates its own service centers and mobile repair units, ensuring control over the after-sales experience and reducing long-term maintenance costs for owners. In 2024, this segment generated $10.5 billion, accounting for 11% of Tesla’s total revenue.
- Full Self-Driving (FSD) & Software – Tesla generates recurring revenue through its FSD subscriptions and one-time purchases, with a long-term goal of monetizing autonomous mobility services.
- Regulatory Credits – Tesla earns revenue by selling regulatory credits to other automakers that need to comply with environmental regulations. Over the past year, this segment contributed $2.5 billion, equivalent to about a fifth of Tesla’s total operating cash flow.
- Energy Generation and Storage
- Tesla’s energy division encompasses the production and sale of solar panels, solar roofs, and energy storage solutions like Powerwall and Megapack. In 2024, this segment experienced significant growth, with revenues increasing by 67% to $10 billion, representing 10% of Tesla’s total revenue.
Growth Catalysts
Robo-Taxi Expansion (2025-2030+)
Tesla’s first paid robotaxi service is set to launch in Austin, Texas, in July 2025. Unlike Waymo’s hardware-intensive, geofenced model, Tesla’s approach relies on scalable software and an expanding fleet of self-driving customer vehicles.
- Musk has projected that within five years, 50% of all miles driven will be autonomous, though a more realistic tipping point is in the early 2030s.
- Texas’ favorable regulatory stance provides a low-friction entry point, making it an ideal first market for Tesla’s autonomous ride-hailing service.
- If Tesla successfully scales its robotaxi network globally, it could disrupt traditional car ownership models and become one of the largest mobility providers in the world.
FSD & Licensing (2027-2028 Revenue Impact)
Tesla’s Full Self-Driving (FSD) software is now approaching the point where interventions are "extremely rare," per Musk. He reiterated that FSD will be 10 times safer than human driving. Tesla is actively working toward regulatory approval for full autonomy, which Musk believes will happen within five years globally.
Tesla’s Dojo-powered FSD improvements may open the door to licensing agreements with legacy automakers, similar to how Nvidia monetizes AI chips.
Energy & Infrastructure (2024-2030+)
Tesla’s Megapack energy storage business has become one of its fastest-growing segments, with demand driven by utilities seeking grid stabilization solutions.
- Tesla’s energy division grew 90% YoY, now surpassing automotive gross margins.
Robotics & Optimus (Long-Term Disruption, 2030s)
The Optimus humanoid robot is in early-stage deployment within Tesla factories, reducing labor costs.
- Musk revealed that the 22-degree-of-freedom Optimus hand and forearm are now in production.
- The Optimus factory is being built in Austin, and Musk expects humanoid robots to become Tesla’s largest product line.
Risks
Brand Damage from Musk’s Political Affiliation
Elon Musk’s controversial political statements and affiliations have created polarization among consumers and investors. However, the narrative that Tesla’s brand is in decline due to Musk’s politics may be overstated. While some surveys suggest potential declines in Tesla’s brand perception in certain markets, there has also been a surge in interest from previously skeptical demographics, particularly conservative buyers. Google Trends data shows a spike in searches for “buy Tesla” following endorsements from prominent figures outside of Tesla’s traditional customer base. The real impact on demand remains uncertain, but Tesla’s brand loyalty and tech-driven appeal continue to attract a broad customer base.
FSD Not Being Ready or Approved for Full Self-Driving
Tesla’s robo-taxi ambitions and broader AI strategy hinge on FSD achieving full regulatory approval. Delays in government approvals, safety concerns, or legal setbacks could significantly impact Tesla’s ability to scale autonomous ride-hailing, delaying or reducing expected revenue from this segment. Musk has stated that Tesla is “in a race against regulators,” acknowledging that legal hurdles are one of the biggest risks to Tesla’s AI-driven future. Most analysts agree that Tesla's full autonomy timeline is too aggressive, and widespread regulatory approval could take until at least 2027-2028.
BYD and Chinese Competition
Chinese EV manufacturers like BYD have become increasingly competitive, both in pricing and technology. Tesla’s market share in China is at risk as domestic manufacturers continue to scale production and reduce costs, potentially forcing Tesla into price wars that could hurt margins. However, Tesla’s global brand, advanced software, and deep FSD data moat still give it a strong advantage, especially in Western markets.
Market Manipulation & External Risks
Tesla is one of the most shorted stocks on the market, making it a frequent target of misinformation campaigns and stock price manipulation. The transcript suggests that competitors and short sellers actively attempt to influence media narratives and regulatory decisions against Tesla. Additionally, traditional automakers facing disruption from Tesla’s dominance may lobby for regulatory delays to slow Tesla’s progress in AI and autonomy. Investors should be aware of external efforts to suppress Tesla’s valuation, which could impact short-term stock performance despite strong long-term fundamentals.
Valuation
Tesla’s business model is shifting from one-time car sales to AI-powered software and service-based recurring revenue models.
To estimate Tesla’s intrinsic value over the next 10 years, we model:
- Automotive Growth – Continued expansion of Model Y sales and new models, with projected annual revenue growth of 15%.
- Robo-Taxi Monetization – Gradual deployment and scaling of robotaxis, contributing to high-margin, recurring revenue.
- FSD Licensing – Tesla monetizing self-driving technology by licensing FSD to other automakers.
- Energy Business Expansion – Increased Megapack and Powerwall adoption, adding further revenue stability.
- Optimus & Robotics – Potential long-term revenue stream that revolutionizes labor-intensive industries.
If Tesla executes on these high-growth, high-margin opportunities, it could reach a multi-trillion-dollar valuation by 2035, making today’s sentiment-driven sell-off an attractive buying opportunity.
you can view my valuation model and assumptions here: https://docs.google.com/spreadsheets/d/1VsYZE6TRMpp_j7ba9NDZCNqBBRGYYlJa1w7D9WTLvY0/edit?usp=sharing
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Disclaimer
BlackGoat is an employee of Simply Wall St, but has written this narrative in their capacity as an individual investor. BlackGoat has a position in NasdaqGS:TSLA. Simply Wall St has no position in any companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimate's are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
