Tesla (TSLA) saw its stock soar by 63% last year, reaching an all-time high in December. Many investors believed the company would thrive due to a friendlier regulatory environment, especially under President Trump’s administration. These factors fueled optimism about Tesla’s future in autonomous driving and robotics, technologies that some analysts predicted could form trillion-dollar markets.
However, despite this optimism, Tesla is now facing challenges. CEO Elon Musk has long claimed that Tesla would become the world’s most valuable company. Yet, the stock has dropped 44% from its peak. Tesla’s core business faces significant hurdles, and Musk’s ambitious predictions may not materialize.
Tesla still relies heavily on its electric vehicle (EV) sales, which account for 79% of its revenue. Initially, Tesla dominated the EV market, but competition is rapidly increasing. In fact, deliveries grew only 38% in 2023, far below Musk’s earlier prediction of 50% growth. Even worse, 2024 saw a 1% decline in deliveries. Tesla’s core business now struggles to maintain its leading position, especially in key markets.
The decline in sales is most evident in Europe. In January, Tesla’s sales in Europe plunged by over 50% compared to the previous year. Germany, where overall EV sales grew by 53%, saw a nearly 60% drop in Tesla sales. In Australia, sales also fell by 33%, further emphasizing the spread of weakness. The trend continued in February, with Tesla seeing sharp declines in countries like Norway, France, and Denmark. Consumers are increasingly choosing more affordable EVs, such as those from China’s BYD, which offers a model for under $10,000.
To combat these setbacks, Musk is betting on autonomous driving and robotics. He believes that Tesla’s full self-driving (FSD) technology and Optimus humanoid robots could revolutionize industries far beyond the EV market. Musk envisions the robotaxi service, using FSD, as a huge revenue generator. Tesla’s core business could pivot toward these futuristic technologies, although these markets are not yet fully developed.
Wall Street analysts see potential in Tesla’s ventures, with some predicting that FSD could add trillions to Tesla’s valuation. However, skeptics question the feasibility of such high projections, considering Tesla’s current revenue is far from those levels. Musk has also touted Optimus as a multi-trillion-dollar opportunity, but this remains speculative at best.
In conclusion, Tesla’s core business faces significant pressure as competition grows and sales decline. While Musk’s futuristic visions may provide some hope, they are still in early stages. Investors and analysts will be watching closely to see if Tesla can turn these challenges into opportunities. As the market evolves, only time will tell whether Tesla’s business model can remain sustainable or if it will need to adapt to survive.
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