Tesla’s robotaxis just hit the streets. So did the stakes

Tesla needs a win.

After a bruising year marked by slowing EV sales, shrinking margins, and a CEO whose personal brand is increasingly overshadowing his company’s, the once-unstoppable EV-maker has found itself in unfamiliar territory: vulnerable. Tesla, for years considered a category-defining disruptor, now looks a lot more like a legacy car company with a very modern PR problem.

So when Elon Musk unveiled Tesla’s first robotaxi pilot in Austin, Texas, over the weekend — complete with human safety monitors, geofenced routes, and a wink at meme culture with a $4.20 fare — it wasn’t just another headline-generating Musk stunt. It was a signal flare. The handful of driverless-ish Model Ys zipping through a small part of Texas may seem like a modest rollout, but for Tesla, they represent something far bigger: a bet that autonomous driving can do what EVs no longer reliably can — drive growth, justify a sky-high valuation, and restore some of the tech-world magic Musk once had at his fingertips.

In other words, the robotaxi rollout isn’t just a pilot. It’s a pivot.

The problem Tesla can’t outdrive

The urgency behind the move is rooted in Tesla’s eroding fundamentals. The company is still selling cars, but the red-hot demand that once made every new Tesla a cultural moment has cooled. In China — Tesla’s most important international market — deliveries dropped 17% in April year-over-year. In the U.S., registrations fell by 16% in the same month. And in Europe, the company saw double-digit sales declines in key markets such as France, Sweden, and the Netherlands, with some sales plunging as much as 81%.

The broader EV market isn’t collapsing, but it’s maturing, and competition is intensifying. Chinese manufacturers such as BYD are flooding the market with cheaper — and potentially better — alternatives, while Western automakers are catching up with well-priced hybrids and new electric entries. Tesla’s lead, once considered unassailable, is shrinking. Fast.

Margins are following suit. 

Tesla’s fiscal first-quarter automotive gross margin came in around 16% — well below its pandemic-era peak of 25% — despite aggressive price cuts and zero-interest financing promotions. The deals have helped volume, but they’ve come at the cost of profitability, and some analysts have grown skeptical. 

Meanwhile, the brand’s cultural cachet has taken a hit. Musk’s increasingly polarizing persona — amplified by his social media behavior and political alliances (and feuds) — has alienated some consumers and investors. In parts of Europe, Tesla has become a flashpoint for protests. In Sweden, workers rallied against Tesla over its refusal to sign collective bargaining agreements. In Germany, climate activists targeted the company’s Gigafactory. Musk’s proximity to far-right politics hasn’t helped, either, turning what was once an apolitical tech brand into a lightning rod for controversy.

All of that has left Tesla in an unusual position: still enormous, but no longer ascendant. And as its once-generous margins narrow and its vehicle lineup ages, Tesla needs more than incremental improvement. It needs a second act.

Betting it all on autonomy

Enter robotaxis.

For close to a decade, Musk has pitched autonomy as Tesla’s inevitable evolution: a world where every Tesla on the road doubles as a revenue-generating, self-driving taxi. Tesla’s Full Self-Driving (FSD) software is already a central piece of this puzzle. Musk has sold investors on a vision of a fully autonomous Tesla fleet that could turn every parked car into a revenue-generating asset. Sold for $12,000 up front or $220 per month, FSD has been pitched as both a near-term driver-assistance system and a long-term autonomy platform. But it’s the latter use case — driverless Tesla robotaxis dispatched through an Uber-style network — that investors are increasingly focused on.

To outsiders, the robotaxi launch — limited in scope, monitored by humans, and nowhere near full autonomy — may seem underwhelming. But internally and among investors, it represents a critical test of Tesla’s ability to shift its business model. If autonomy can be proven at scale, it could unlock a high-margin revenue stream that doesn’t rely on new car sales or expensive manufacturing cycles.

According to a Sunday note from RBC Capital Markets, Tesla’s robotaxi efforts represent about 60% of Tesla’s long-term valuation model. And analyst Tom Narayan said in a November note that “robotaxis account for 44% of [Tesla’s] valuation,” adding that “FSD accounts for another 33% of our valuation.”

Narayan said in the more recent note that the launch itself was “widely expected” to be a small-scale pilot using Model Ys in a geofenced zone and said that, from conversations with investors, “feedback has been mostly neutral.” The key, Narayan said, is whether Tesla can prove that a vision-only, camera-based system — without lidar, radar, or high-definition mapping — can work at scale. If it can, the economics could be transformative.

“Our modeling does not assume Tesla has dominant market share in any region,” Narayan wrote. “As such, there could be further upside should the company show it can do this.”

Morgan Stanley analyst Adam Jonas has projected that Tesla could eventually run a network of 7.5 million autonomous vehicles, each generating recurring revenue. Wedbush analyst Dan Ives has called the robotaxi opportunity a potential trillion-dollar market cap addition over time. He wrote in a Sunday note — where he raved about his experience in a robotaxi — that the launch is the beginning of a “golden age” for Tesla.

Grand View Research has suggested that the global autonomous ride-hailing market could reach close to $100 billion by 2030, and MarketsandMarkets has estimated that the robotaxi segment alone will reach over $45 billion by 2030. If Tesla captures even a fraction of that — and can do so with lower costs and higher margins than its rivals — the upside is massive.

But that’s a big if.

Not everyone’s buying the hype

Despite some investor excitement, skepticism remains.

UBS recently cut its price target on Tesla (to $215), warning that the robotaxi opportunity “is already priced into the stock.” Guggenheim analyst Ronald Jewsikow described Sunday’s launch as “a relatively uneventful Sunday in Austin, and uneventful is a good outcome.” In a Monday note, he wrote: “Based on our analysis of publicly available videos from the influencer community, the day was filled with almost entirely clean driving performance.” He kept his “Sell” rating and $175 price target, citing valuation.

Baird, a typically Tesla-friendly firm, warned that Musk’s timelines on scaling may be “a bit too optimistic.” And while Wedbush sees the robotaxi pivot as the start of a massive market shift, others are concerned about how quickly Tesla can navigate technical, regulatory, and reputational hurdles; the company’s stock is vulnerable to any sign that autonomy is slipping further down the road. Fairlead Strategies’ Katie Stockton told Barron’s that Tesla has strong support around $300 but upside resistance near $370-$380 — and the market could treat the robotaxi rollout as a “sell-the-news” moment if momentum stalls.

This disagreement isn’t academic. It’s urgent.

If Tesla fails to turn its autonomy promise into a scalable business, much of the company’s valuation could evaporate. The robotaxi story isn’t a side narrative. It’s the centerpiece. Without robotaxis and FSD, Tesla’s market cap would likely fall back in line with traditional automakers — most of whom trade at far lower earnings multiples.

The Austin pilot, for all the fanfare, is still more of a statement than a solution. Musk hailed it on X as the “culmination of a decade of hard work,” but realistically, it’s just a down-payment on a vision. Meanwhile, Tesla still trails rivals in real-world autonomous deployment, and the competition is cruising ahead.

Waymo’s fully driverless robotaxis already operate in parts of Phoenix, San Francisco, and Los Angeles, with no human monitors and millions of real-world miles under their belt. Zoox is testing purpose-built vehicles with no steering wheel at all. Cruise, GM’s self-driving unit, is rebooting after a string of safety scandals but plans to return to the streets later this year. Compared with these players, Tesla’s Model Y robotaxis — with a front-seat babysitter — look a little bit more like a beta test than a breakthrough.

Then, there’s the regulatory landscape that Tesla faces. Texas, which has friendlier regulatory laws, still plans to introduce AV permit rules by September 1. Federal regulators at NHTSA are reviewing crash data linked to Tesla’s FSD features. Insurance underwriting, municipal permitting, and legal liability frameworks all remain in flux. Autonomy isn’t just a technical problem, it’s a political and legal one.

For all of Tesla’s experimentation — solar roofs, humanoid robots, energy storage — the company’s financial engine remains its cars. And that engine is sputtering. The Model 3 and Y are aging. The S and X are niche. The Cybertruck, while headline-grabbing, is unlikely to scale meaningfully in the near term. Tesla’s energy business is growing, but it still represents a small fraction of total revenue. Optimus, the humanoid robot, remains a speculative long-term project.

What Tesla needs isn’t another model. It needs a platform — a scalable, recurring revenue business that justifies its premium multiple and restores the “tech stock” aura it once enjoyed. Robotaxis, if they work and can scale quickly enough, fit that brief. They could transform Tesla’s hardware into high-margin software platforms, monetized not just through car sales but through services, subscriptions, and mobility-as-a-service infrastructure.

The market seems to understand what’s at stake. 

Tesla shares jumped close to 10% on Monday, adding roughly $100 billion in market value in a single day. But behind the enthusiasm is a more sobering reality: Tesla’s valuation rests heavily on a bet that has yet to pay off.

As Paul Marino, chief revenue officer at GraniteShares, told Reuters last year: “AI and robotaxi is such a huge opportunity over the next two, three, five years. So if you’re a long‑term believer, you’re going to take the margins like your medicine.” That’s essentially Tesla’s pitch to investors now: Endure the short-term pain, believe in the vision, and wait for the margins to come roaring back — powered not by steel and lithium but by software.

If Tesla can scale autonomous rides, regulators nod, users pay, and revenue flows. If not, Tesla remains an overvalued EV maker watching margins vanish. For now, dots remain unconnected. Can robotaxis move from geofenced pilots to grid-wide fleets? Will revenues grow enough to free Tesla from discount-driven EV sales? Does the AI hypothesis outweigh execution?

In a few quarters, this question will likely no longer be theoretical.

Tesla’s valuation hinges on whether robotaxis evolve from press releases into real money-making machines. The launch may not have changed the way people move (yet), but the robotaxis will continue to shape how investors view the company’s future. Whether the robotaxi gamble pays off won’t just depend on how far these vehicles can drive — but whether they can carry Tesla’s financial future with them.