Autonomous Driving And Optimus Will Power The Decarbonization Era

Key Takeaways

• The launch of fully autonomous driving and robotics could create major new revenue streams and transform Tesla’s business model beyond vehicle sales.
  
• Advanced manufacturing, energy storage growth, and an AI-driven global strategy may drive higher margins, cost efficiencies, and rapid geographic expansion.
  
• Mounting macroeconomic, regulatory, and competitive pressures threaten Tesla's margins, profitability, and growth, while costly bets on autonomy and robotics add significant execution risk.

Catalysts

Designs, develops, manufactures, leases, and sells electric vehicles, and energy generation and storage systems in the United States, China, and internationally.

• The imminent rollout and rapid scaling of fully autonomous driving—including robotaxi services and unsupervised FSD capability—could generate large, recurring high-margin software revenues and unlock entirely new business models for Tesla, dramatically increasing both top-line revenue and net margins.
  
• The projected mass production and deployment of the Optimus humanoid robot signals a potential leap into labor automation on an unprecedented scale, opening a vast new addressable market, diversifying revenue streams, and supporting long-term earnings growth far beyond vehicles.
  
• Accelerated and highly localized manufacturing expansion, with the next-generation unboxed process and advanced vertical integration, is expected to drive significant reductions in per-unit costs, boost operating leverage, and enhance gross margins as production volumes increase.
  
• Tesla’s success in scaling its energy storage and grid solutions business (Megapack and Powerwall), paired with advancing battery technology and onshoring cell production, positions the company as a leader in the global energy transition, providing greater revenue diversification and margin stability as demand for EVs and clean energy expands.
  
• Tesla’s AI-first approach, leveraging proprietary chip design and software—not reliant on expensive sensors or region-specific mapping—enables highly scalable and adaptable vehicle autonomy across global markets, supporting rapid geographic expansion and a disproportionate share of future mobility-related revenue and profits.

Tesla Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Tesla compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Tesla's revenue will grow by 24.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 6.4% today to 9.7% in 3 years time.
• The bullish analysts expect earnings to reach $18.1 billion (and earnings per share of $5.7) by about April 2028, up from $6.1 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 116.4x on those 2028 earnings, down from 150.3x today. This future PE is greater than the current PE for the US Auto industry at 19.4x.
• Analysts expect the number of shares outstanding to grow by 1.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 10.9%, as per the Simply Wall St company report.

Tesla Future Earnings Per Share Growth

Risks

• Ongoing global economic deceleration and concerns about stagflation could significantly weaken consumer demand for Tesla’s high-priced vehicles, leading to lower revenue growth and increased pressure on net margins as Tesla tries to maintain or stimulate demand with pricing adjustments.
  
• The risk of escalating tariffs, geopolitical tensions, and supply chain disruptions—especially related to US-China trade and new Section 232 auto tariffs—could drive up Tesla’s costs of goods sold, reduce scale efficiencies, and dampen profitability, with additional threats to capital expenditure needs as import costs rise.
  
• Increasing competition from both established automakers and aggressive Chinese EV manufacturers is eroding Tesla’s brand differentiation, negatively impacting its pricing power and compressing gross margins, which may ultimately pressure net earnings.
  
• Tesla’s highly ambitious plans around large-scale autonomy and humanoid robotics remain unproven, with significant execution and regulatory risks that, if unmet or delayed, could lead to investor disappointment and put downward pressure on valuation multiples and future revenue streams.
  
• Growing climate policy scrutiny and new regulatory frameworks—such as stricter sustainability and local content requirements in major regions like the EU and US—could increase compliance costs, slow new product launches, and put persistent downward pressure on operational profitability and earnings per share.

Valuation

• The assumed bullish price target for Tesla is $465.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Tesla's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $465.0, and the most bearish reporting a price target of just $115.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $186.6 billion, earnings will come to $18.1 billion, and it would be trading on a PE ratio of 116.4x, assuming you use a discount rate of 10.9%.
  
• Given the current share price of $284.95, the bullish analyst price target of $465.0 is 38.7% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.