Tesla's darkening outlook to test Robotaxi vision pushed by Musk
The electric-vehicle maker is expected to post the sharpest drop in revenues in more than a decade when it reports earnings on Wednesday, as demand for Tesla products dries up. And with federal incentives meant to encourage EV sales set to disappear later this year, things are likely to get even more challenging in the coming months.
That's piling pressure on Musk to push Tesla's robotaxi program, that began operating on a limited basis in Austin last month. It's increasingly seen as underpinning the value in the company's shares, which have rallied 50% from an April low.
'Tesla, more than any other large-cap stock, relies on investor confidence in the company's long-term vision of the future,' said Nicholas Colas, the co-founder of DataTrek Research, who spent more than a decade covering the auto industry as an analyst.
Tesla's sales have suffered from an aging lineup and the backlash against Musk's role in US President Donald Trump's administration, where he was charged with drastically reducing government spending. The stock has taken a hit as well, down 31% from a December peak when Musk's proximity to Trump was seen as a boon for the company.
Still, Tesla shares remain richly valued at 142 times projected profits, compared with 27 times for the Nasdaq 100 Index, reflecting a significant disconnect from the company's souring financial prospects.
Wall Street has slashed 2025 profit estimates by 28% over the past three months, according to data compiled by Bloomberg. For the second quarter, analysts are projecting adjusted earnings of 42 cents a share on revenue of $22.6 billion, down 18% and 11%, respectively, from the same period a year ago. That would represent the biggest drop in quarterly sales since 2012.
Tesla's auto manufacturing business, which generated 90% of the company's revenue in 2024 and contributed 94% of its gross margin, has also been hampered by a production pause to retool assembly lines for the redesigned Model Y and rising competition in China from local brands.
Then there's Trump's signature tax bill, which will remove two key incentives for the EV industry. A $7,500 tax credit that applies to most American-made EVs will go away starting in September, as will a separate program that penalized traditional carmakers for failing to adhere to federal fuel economy standards. The sale of those credits generated $2.8 billion in revenue for Tesla last year.
Tesla bulls, however, remain undeterred. Nearly half of the analysts covering the company recommend buying the stock, a share that hasn't changed since the beginning of the year.
The robotaxi is the key reason for the optimism, with Musk predicting that hundreds of thousands of these vehicles will be on the road by late 2026. Long-term investors also point to other futuristic ambitions such as the humanoid robot called Optimus, and a faith that Musk can keep pushing the boundaries of innovation.
Roughly 95% of Tesla's share price is tied to what the company might do in the future, according to the calculations of DataTrek's Colas. Compared to the rest of the so-called Magnificent Seven stocks, only Nvidia Corp. and Microsoft Corp. are close, at around 75%.
Tesla is now aiming to bring its driver-less taxis to California and Arizona. Earlier this month, Musk said robotaxis could launch in the San Francisco Bay area 'probably in a month or two,' pending regulatory approvals.
But the company faces major competition. Google parent Alphabet Inc.'s self-driving car unit Waymo already has been operating a similar service in Los Angeles, Austin, Phoenix and San Francisco. It also just began offering trips through Uber Technologies Inc.'s platform in Atlanta, with Miami and Washington expected next year. Separately, Uber is also teaming up with EV-maker Lucid Group Inc. and self-driving tech startup Nuro to launch a robotaxi fleet.
It's this focus on long-term growth that makes Tesla the ultimate 'story' driven stock, said Joseph Spak, a UBS analyst.
'The Tesla story is about Musk,' said Joe Gilbert, portfolio manager at Integrity Asset Management. 'If he can give confidence to the market that he is re-focused on robotaxi and the brand, the stock can work.' –BLOOMBERG
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Sinar Daily
30 minutes ago
- Sinar Daily
Airbnb contributes RM9.2 billion to Malaysia's economy in 2024
Travel in Malaysia is expanding beyond major cities, with more than half of Airbnb guests' spending in 2024 occurring outside Kuala Lumpur and Selangor. 07 Aug 2025 08:00pm Travel in Malaysia is expanding beyond major cities, with more than half of Airbnb guests' spending in 2024 occurring outside Kuala Lumpur and Selangor. - 123RF photo for illustration purpose only KUALA LUMPUR - Airbnb activity contributed RM9.2 billion to Malaysia's economy in 2024, accounting for about five per cent of the tourism sector's gross domestic product (GDP), according to a survey by Oxford Economics. In a statement, the American vacation rental company said the online platform also supported four per cent of tourism-related employment, equivalent to one in every 26 jobs in the industry. Overall, it said Airbnb-linked economic activity helped support around 93,600 jobs and contributed RM2.1 billion in wage income. "Beyond front-line tourism sectors, Airbnb-generated activity injected significant value into the wider economy: contributing almost RM1.4 billion in manufacturing, RM1.2 billion in transport and storage, RM1.2 billion in food and beverage services, and over RM1.0 billion in wholesale and retail trade,' Airbnb said. The survey also found that Airbnb guests' spending in Malaysia, which includes accommodation and non-accommodation expenses, reached RM11 billion in 2024. It said host earnings further support local economies through property upkeep, domestic services, and personal consumption. Additionally, it highlighted a strong rebound in domestic travel, with Malaysian travellers making up 67 per cent of Airbnb guests in 2024, surpassing pre-pandemic levels in 2019. International travellers accounted for the remaining 33 per cent, more than double their share from 2022, reflecting Malaysia's rising global appeal, it said. Malaysians are rediscovering the joy of domestic travel Airbnb said that among international guests, over 80 per cent were from the Asia-Pacific (APAC) region, reaffirming the importance of APAC markets as key inbound sources. Travel in Malaysia is also expanding beyond major cities, with more than half of Airbnb guests' spending in 2024 occurring outside Kuala Lumpur and Selangor. The company said these non-urban areas contributed 62 per cent of Airbnb's GDP impact, supported 63,500 jobs, and generated RM1.3 billion in wages. Airbnb's country head for Southeast Asia and India Amanpreet Bajaj said that with more than half of stays happening outside the major areas of Kuala Lumpur and Selangor, Airbnb is helping spread the economic benefits to more communities in Malaysia. "It is incredibly rewarding to know that Airbnb is helping local businesses thrive, creating jobs, and spreading economic benefits across the country,' he said. - BERNAMA More Like This
Free Malaysia Today
38 minutes ago
- Free Malaysia Today
Trump's higher tariff rates hit goods from major US trading partners
US President Donald Trump's July 31 tariff order imposed duties above 10% on 67 trading partners, while the rate was kept at 10% for those not listed. (AP pic) WASHINGTON : President Donald Trump's higher tariff rates of 10% to 50% on dozens of trading partners kicked in today, testing his strategy for shrinking US trade deficits without massive disruptions to global supply chains, higher inflation and stiff retaliation from trading partners. US customs and border protection agency began collecting the higher tariffs at 12.01am after weeks of suspense over Trump's final tariff rates and frantic negotiations with major trading partners that sought to lower them. Goods loaded onto US-bound vessels and in transit before the midnight deadline can enter at lower prior tariff rates before Oct 5, according to a CBP notice to shippers issued this week. Imports from many countries had previously been subject to a baseline 10% import duty after Trump paused higher rates announced in early April. However, since then, Trump has frequently modified his tariff plan, slapping some countries with much higher rates, including 50% for goods from Brazil, 39% from Switzerland, 35% from Canada and 25% from India. He announced yesterday a separate, 25% tariff on Indian goods to be imposed in 21 days over the South Asian country's purchases of Russian oil. 'RECIPROCAL TARIFFS TAKE EFFECT AT MIDNIGHT TONIGHT!,' Trump said on Truth Social just ahead of the deadline. 'BILLIONS OF DOLLARS, LARGELY FROM COUNTRIES THAT HAVE TAKEN ADVANTAGE OF THE US FOR MANY YEARS, LAUGHING ALL THE WAY, WILL START FLOWING INTO THE US. THE ONLY THING THAT CAN STOP AMERICA'S GREATNESS WOULD BE A RADICAL LEFT COURT THAT WANTS TO SEE OUR COUNTRY FAIL!' Trump said. Eight major trading partners accounting for about 40% of US trade flows have reached framework deals for trade and investment concessions to Trump, including the EU, Japan and South Korea, reducing their base tariff rates to 15%. Britain won a 10% rate, while Vietnam, Indonesia, Pakistan and the Philippines secured rate reductions to 19% or 20%. 'For those countries, it's less-bad news,' said William Reinsch, a senior fellow and trade expert at the Center for Strategic and International Studies in Washington. 'There'll be some supply chain rearrangement. There'll be a new equilibrium. Prices here will go up, but it'll take a while for that to show up in a major way,' Reinsch said. Countries with punishingly high duties, such as India and Canada, 'will continue to scramble around trying to fix this,' he added. Trump's order has specified that any goods determined to have been transshipped from a third country to evade higher US tariffs will be subject to an additional 40% import duty, but his administration has released few details on how these goods would be identified or the provision enforced. Trump's July 31 tariff order imposed duties above 10% on 67 trading partners, while the rate was kept at 10% for those not listed. These import taxes are one part of a multilayered tariff strategy that includes national security-based sectoral tariffs on semiconductors, pharmaceuticals, autos, steel, aluminum, copper, lumber and other goods. Trump said yesterday the microchip duties could reach 100%. China is on a separate tariff track and will face a potential tariff increase on Aug 12 unless Trump approves an extension of a prior truce after talks last week in Sweden. He has said he may impose additional tariffs over China's purchases of Russian oil as he seeks to pressure Moscow into ending its war in Ukraine. Revenues, price hikes Trump has touted the vast increase in federal revenues from his import tax collections, which are ultimately paid by companies importing the goods and consumers of end products. The higher rates will add to the total, which reached a record US$27 billion in June. US treasury secretary Scott Bessent has said that US tariff revenues could top US$300 billion a year. The move will drive average US tariff rates to around 20%, the highest in a century and up from 2.5% when Trump took office in January, the Atlantic Institute estimates. Commerce department data released last week showed more evidence that tariffs began driving up US prices in June, including for home furnishings and durable household equipment, recreational goods and motor vehicles. Costs from Trump's tariff war are mounting for a wide swath of companies, including bellwethers Caterpillar, Marriott, Molson Coors and Yum Brands. All told, global companies that have reported earnings so far this quarter are looking at a hit of around US$15 billion to profits in 2025, Reuters' global tariff tracker shows.
Free Malaysia Today
44 minutes ago
- Free Malaysia Today
Toyota cuts profit forecast due to US tariffs
Toyota's shares fell 0.6% in Tokyo afternoon trade. (EPA Images pic) TOKYO : Japanese auto giant Toyota today cut its annual net profit forecast to ¥2.66 trillion (US$18.06 billion) owing to the impact of US tariffs. 'Due to the impact of US tariffs and other factors, actual results showed decreased operating income, and the forecast has been revised downward,' the company said in a statement. Its shares fell 0.6% in Tokyo afternoon trade. The Trump administration in April imposed a 25% levy on Japanese cars imported into the US, dealing a hefty blow to Japan and its crucial auto sector. Although Tokyo and Washington announced a trade deal in July, lowering that rate to 15% and providing a degree of relief for the industry, it's not yet clear when it will take effect. There is also confusion over whether the car tariff – as well as other 'reciprocal' levies – will be capped at 15%, or if these would come on top of those in place before Trump's trade blitz. The auto industry had a pre-existing 2.5% tariff, meaning the levy currently stands at 27.5%. Revenues in Toyota's first quarter from April to June were up 3.5%, but net income dropped by 36%.
