Tesla Has a Leg Up on Self-Driving Car Competitors, Says Goldman Sachs Ahead of Robotaxi Launch
Tesla shares rose on Tuesday in anticipation of the launch of the EV maker's robotaxi service in Austin, Texas, later this week.
Tesla has two potential advantages in the autonomous vehicle market, according to Goldman Sachs analysts: low hardware costs and the ability to scale quickly with AI-powered self-driving software.
Goldman joined other Wall Street firms on Tuesday in questioning the viability of CEO Elon Musk's ambitious targets for the robotaxi rollout.Tesla investors on Tuesday were putting last week's feud between CEO Elon Musk and President Trump in the rearview mirror and looking ahead to what they hope will be the EV maker's next growth driver.
Tesla (TSLA) shares surged Tuesday, rising nearly 6% for their third straight day of big gains, in anticipation of the launch of its robotaxi service in Austin, Texas. The company expects to operate 10 to 20 vehicles starting this week, and grow the fleet in the coming months.
Goldman Sachs analysts in a note on Tuesday said the EV maker could have two advantages in the AV market. First, the scale of its existing business and certain design choices—Tesla uses custom silicon and does not use lidar or radar to navigate—could make its vehicles significantly less expensive than the competition. Second, its 'end to end AI training approach' could facilitate faster scaling by creating an adaptable software that uses reasoning, not programming, to understand new environments.
Tesla has set aggressive scaling targets for its AV business. The company plans to enter markets beyond Austin before the end of the year, and CEO Elon Musk expects to have 'hundreds of thousands' of AVs on the road by the end of next year. Tesla expects operating costs at scale to be about 40 cents per mile.
Goldman Sachs has more modest expectations. The firm estimates the average AV's depreciation, insurance, and remote operator costs currently total about $1.34 per mile, and they don't expect those costs to decrease to 40 cents until about 2040. They also expect Tesla will have about 2,500 robotaxis in service by the end of 2027.
Goldman is not alone in thinking Tesla's targets are unrealistic. Baird downgraded Tesla stock on Monday, citing 'lofty expectations' as a primary reason. 'We believe Musk's comments regarding the robotaxi ramp rate are a bit too optimistic, and we believe this excitement has been priced into shares,' wrote research analyst Ben Kallo.
A lot is riding on the success of Tesla's robotaxi service. Musk has been insisting for more than a year that Tesla's core business is AI and robotics, not cars. The company began production of its Dojo Supercomputer in 2023, and in 2024 began prioritizing its robotaxi service over the development of a low-cost, human-driven EV model.
Anticipation of the robotaxi rollout has buoyed Tesla's share price ever since despite mounting troubles. Sales slumped in the first quarter amid increased competition and a consumer backlash to Musk's work with the Trump administration. The stock lost more than half of its value between hitting an all-time high in December and early April when stocks nosedived after Trump unveiled steep tariffs on most of the world's goods.
Shares rebounded in late April and May after Musk promised to spend less time in Washington. But the stock took another hit earlier this month when Musk and the president sparred online over the impact the tax bill working its way through Congress could have on America's fiscal deficit. The public spat jeopardized Musk's amiable relationship with the president, which was a key reason many Tesla investors looked past weak sales and an uncertain outlook.
Gene Munster and Brian Baker of Deepwater Research said in a note last week they do not anticipate Musk's feud with Trump will derail Tesla's AV leadership. The White House, they said, "has little to gain in standing in front of autonomy" considering the race between the U.S. and China to be the global leader in artificial intelligence. "The bottom line, [we] expect cooler heads to prevail and the Federal Government will continue to support the growth of these services."
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