Expectations were high for Elon Musk's robotaxi event, but analysts were underwhelmed
For years, one of Tesla $TSLA’s (TSLA) most pronounced strengths has been its devoted retail investors who are willing to put their money where their mouth is. But that enthusiasm — propelled by CEO Elon Musk’s many promises — has made Tesla a victim of its own hype.
Tesla stock fell by about 8% in trading Friday morning — the day after the Austin, Texas-based company’s “We, Robot” event, which Musk first teased in April. The event was meant to be the culmination of years of Musk’s comments about developing a robotaxi network, which go back at least to April 2019, and to demonstrate Tesla’s future as an artificial intelligence firm, not an automaker.
Read More: A ‘Cybercab,’ a surprise ‘Robovan,’ and a bartending robot: 5 takeaways from Tesla’s robotaxi launch
Instead, the event left many on Wall Street with more questions than answers. For some, “We, Robot” — for all its spectacle — was underwhelming.
“In contrast to most investor events these days, this was more akin to a show followed by a big party,” Deutsche Bank (DB) analysts wrote Friday morning. “While we are certainly believers in Tesla succeeding in autonomy and humanoid robotics, we generally came away underwhelmed by the lack of details disclosed and short length of the Cybercab demo ride.”
RBC Capital Markets (RY) analysts said investors surveyed at the event at Warner Bros. Discovery’s (WBD) studio in California thought the event was light on real numbers, adding that the event “might have been underwhelming.” Morgan Stanley $MS (MS) called it “disappointing,” while Nancy Tengler — the CEO of Laffer Tengler Investments, a Tesla shareholder — noted that the vagueness of the event would disappoint the market.
“Something caused Tesla shares to rise +68% from their 52-week low of $142.05 on April 22 to close yesterday at $238.77 ahead of the company’s much heralded Robotaxi Day — and it sure wasn’t the outlook for Tesla vehicle sales, earnings, or cash flow,” J.P. Morgan (JPM) analysts wrote Friday, noting the rally must have been driven by enthusiasm for the event, which was “notably lacking in detail.”
The first red flag that the enthusiasm may be misplaced was the initial announcement of the event, the analysts wrote, referring to Musk’s seemingly spur-of-the-moment tweet following his denial of a report that claimed Tesla would kill its $25,000 Model 2. The second was when the event was delayed to October from August, which Musk said was due to a needed design change and to show off “a few other things.”
At the event, Tesla gave investors a first look at its Cybercab, which comes with “butterfly wing” doors, has no steering wheel or pedals, and closely mirrors the 2022 concept art featured in Walter Isaacson’s recent biography of Musk. But the model seems to only be able to comfortably fit two people, which may limit its success as a competitor to rideshare providers such as Uber $UBER (UBER) and Lyft $LYFT (LYFT).
The CEO has previously laid out his vision for a robotaxi network as a “combination of Airbnb $ABNB (ABNB) and Uber” with owners able to opt their cars into the service at their choosing and make money while sleeping. On Thursday, he seemed to encourage people — especially current drivers for Uber and Lyft, who often aren’t very wealthy — to buy multiple Cybercabs.
It’s unclear whether or not Tesla would let its Cybercabs be used on non-Tesla networks such as Uber’s or how the profits would be shared between a network operator and the car owner. Either way, J.P. Morgan analysts said, shifting from a Tesla-operated robotaxi network to selling those vehicles wouldn’t be a welcome prospect.
Tesla expects the Cybercab to eventually be available for sale to consumers at less than $30,000, but it won’t enter production “before 2027,” according to Musk. The company also revealed the Robovan, which can carry 20 people, although Tesla didn’t provide any information related to cost, when the vehicle may enter production, or additional specifications. Some analysts had expected Tesla to show off a preview of the Model 2 on Thursday, but it received no mention from the company, which may be part of why shares are down.
“Timing of Cybercab is still two plus years away, too far for the incremental investor to put much weight into the opportunity and the timing asks existing investors to continue the waiting game,” Deepwater Asset Management’s Gene Munster said Friday morning, adding that the EV maker’s investors are waiting for other company results such as “improving margins, higher delivery growth rates and FSD [Full Self-Driving].”
Despite the stock slide and the general negativity on Wall Street, Tesla retail investors popular on Musk’s X $TWTR are largely happy with the event’s turnout. Tesla bulls are also still optimistic. Wedbush Securities analyst Dan Ives wrote that his team “strongly” disagrees that the event was a disappointment, stating it showed the Cybercab “is now a reality and not just talk.”
“Tesla is heading down an autonomous and robotics future and last night was taking the curtains off on this broader AI driven strategy a decade in the making,” Ives wrote.
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