Tesla Makes Money Selling Electric Vehicles, but 86% of Its Earnings Could Soon Come From This Instead
News Summary
Cathie Wood's Ark Investment Management forecasts a significant shift in Tesla's business, predicting that a staggering 86% of its earnings will come from self-driving robotaxis by 2029, potentially pushing its stock price to $2,600, a 615% increase from current levels. However, Tesla's core EV business is sputtering. Passenger EV deliveries declined by 1% in 2024, the first annual drop since 2011, and shrank by 13% in the first half of 2025, leading to a 14% revenue decline and a 31% collapse in EPS. This downturn is largely attributed to surging competition from low-cost EV producers like China's BYD, which is rapidly gaining market share. Tesla is betting heavily on autonomous ride-hailing with its Cybercab, slated for mass production in 2026, which will run entirely on its FSD software. Nevertheless, scaling this venture faces substantial challenges, including the lack of regulatory approval for unsupervised FSD use in the U.S. and intense competition from established ride-hailing giants like Uber. The article's author views Ark's forecast as overly ambitious, citing Tesla's shrinking earnings, high valuation, and a decade of unfulfilled FSD promises.
Background
Tesla, a leading global electric vehicle (EV) manufacturer, has built its business model around EV sales, progressively expanding into energy storage and artificial intelligence. In recent years, the company has faced intense competition in the global EV market, particularly from Chinese brands like BYD, which has impacted its market share and profitability. Concurrently, Tesla CEO Elon Musk has consistently championed the company's Full Self-Driving (FSD) technology as a key future growth driver, repeatedly promising the advent of fully unsupervised autonomous driving. However, FSD has encountered ongoing hurdles in regulatory approval and practical implementation. Ark Investment Management, known for its bullish growth forecasts in disruptive technologies, particularly in AI, robotics, and autonomous driving, has made bold predictions regarding Tesla's future earnings composition. This reflects Ark's strong conviction in technology-driven disruption reshaping traditional business models.
In-Depth AI Insights
Given Tesla's current performance and regulatory environment, what are the primary hurdles to Ark Invest's extremely optimistic robotaxi projections? Ark Invest's projections face several severe challenges, making their short-term realization highly improbable: - Regulatory Approval Barriers: The core Full Self-Driving (FSD) software has yet to receive approval for unsupervised use in the U.S., which is a fundamental prerequisite for large-scale commercial robotaxi operations. - Competitive Landscape: The autonomous ride-hailing market is not a vacuum; existing giants like Uber have partnered with multiple autonomous driving companies, possessing vast user bases and operational experience. Tesla faces immense pressure to build its network from scratch. - Technology and Time: While Musk has long promised FSD, achieving and popularizing fully unsupervised driving is far more complex and time-consuming than anticipated, making Ark Invest's 2029 timeline appear overly ambitious. How will the continuous contraction of Tesla's core EV business impact its strategic choices and financial flexibility for the autonomous driving transition? The weakening core EV business significantly constrains Tesla's strategic transition: - Cash Flow Pressure: With the higher-margin robotaxi business not yet scaled, declining revenue and profits from the core business could reduce the company's free cash flow, limiting investments in autonomous driving R&D and deployment. - Valuation Support Risk: High valuations depend on a future growth narrative, and underperforming core business undermines this narrative, increasing market skepticism about the company's transition prospects and potentially leading to stock price volatility. - Resource Diversion: To compete in the existing market (e.g., launching low-cost models), the company might be forced to divert resources, affecting its efficiency in concentrating efforts on core autonomous driving projects. Under President Trump's administration, what might be the characteristics of U.S. regulatory attitudes towards autonomous driving technology, and what are the potential implications for Tesla's Cybercab launch? Under the Trump administration, U.S. autonomous driving regulation might exhibit the following characteristics, posing specific implications for Tesla: - Potential Focus on Innovation and Industry Growth: The Trump administration generally favors deregulation to stimulate economic growth and technological innovation, which could provide a relatively permissive environment for autonomous driving testing and deployment. - State-level Variations vs. Federal Leadership: Despite potential federal encouragement, states might still maintain differing regulations for autonomous driving, increasing the complexity for Tesla to roll out Cybercab nationwide in the U.S. - Data Security and National Security Considerations: Amid geopolitical tensions, data privacy and national security could become significant factors in autonomous driving technology approvals, especially concerning foreign technology or supply chains, potentially imposing additional requirements on some of Tesla's technical components or data handling practices.