Elon Musk's Tesla eyes Robotaxi for half of US population by year-end, seeks regulatory green light
Much of the company's trillion-dollar valuation relies on its bet on its robotaxi service. A small trial began in Austin, Texas, last month with about a dozen Model Y SUVs. It also hinges on its development of humanoid robots.
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Tesla's Chief Executive, Elon Musk, indicated that reduced U.S. government support for electric vehicle makers could lead to "a few rough quarters" for the company. Revenue from self-driving software and services should begin late next year. Shares dropped nearly 5% after Musk's comments on a quarterly results conference call, addressing U.S. government policies under President Donald Trump.
Tesla reported its largest quarterly sales decline in over a decade. Profit missed Wall Street targets, but the profit margin on car manufacturing exceeded some expectations. Musk is pursuing autonomous driving technology for privately owned vehicles and robotaxis, with production planned to begin next year.
Meanwhile, a new, cheaper car is in development. Chief Financial Officer Vaibhav Taneja stated production would ramp up next quarter, slower than initially expected. Initial units were produced by late June. The company did not update its full-year deliveries forecast, citing economic conditions and the timing of the new car's rollout.
"Tesla's disappointing results are not surprising given its recent challenges," said eMarketer analyst Jacob Bourne. "A truly affordable model will boost sales if Tesla positions it effectively without affecting its higher-priced models."
Revenue fell to $22.5 billion for the April-June quarter from $25.50 billion a year prior, slightly below analyst targets compiled by LSEG. Adjusted profit per share of 40 cents lagged the Wall Street consensus.
The automotive gross margin, excluding regulatory credits, was 14.96%, above Wall Street estimates, partly due to lower cost per vehicle. Pricing and margins are important as Tesla navigates demand and faces diminishing government support. Tesla's global deliveries dropped 13.5% in the second quarter. The U.S. government will cut $7,500 tax credits for EV buyers later this year.
"We probably could have a few rough quarters," Musk said, when asked about the credits. "Q4, Q1, maybe Q2, but once autonomy at scale arrives in the second half of next year, certainly by the end of next year, I would be surprised if Tesla's economics are not very compelling."
Tesla had stated in April it would begin producing the more affordable model by the end of the first half. Sources had indicated the vehicle, a stripped-down version of its Model Y SUV, would face delays of at least months. Tesla did not disclose details of the model, units produced, or pricing Wednesday. Musk responded to a question about the vehicle's appearance by saying, "It's just a Model Y," jokingly adding he "let the cat out of the bag there."
Tesla's lineup is relatively old, despite a recent refresh of the Model Y. It faces increasing competition from cheaper EVs, especially in China, and continued backlash against Musk's political views.
The company also stated it continued to expect volume production of its custom-built robotaxi, called the Cybercab, and Semi Truck in 2026. Much of the company's trillion-dollar valuation relies on its bet on its robotaxi service. A small trial began in Austin, Texas, last month with about a dozen Model Y SUVs. It also hinges on its development of humanoid robots.
"Autonomy is the story," Musk said on the conference call, describing plans to roll out autonomous ride-hailing to about half of the U.S. population by the end of this year. Tesla is seeking robotaxi regulatory approval in the San Francisco Bay Area, Nevada, Arizona, Florida, and other locations. The company is close to obtaining regulatory approval for supervised Full Self-Driving driver assistance software in the Netherlands. The robotaxi business was likely to have a material impact on financials around the end of next year, Musk said.
Investors are concerned whether Musk can dedicate sufficient time and attention to Tesla after he formed a new political party this month. He had promised weeks earlier he would reduce government work and focus on his companies. A series of high-profile executive departures, including a long-time Musk confidant overseeing sales and manufacturing in North America and Europe, adds to the concerns.
