Tesla shares plunge as robotaxi fails to impress investors

Elon Musk unveiled the driverless robotaxi, which will cost less than $30,000

Tesla's robotaxi at its showcase event in Los Angeles. California. Reuters

Tesla shares dropped almost 9 per cent on Friday after the company's long-anticipated robotaxi event, where Elon Musk showcased the new Cybercab autonomous concept vehicle, failed to impress investors.

Billionaire businessman Mr Musk, co-founder and chief executive of Tesla, made a dramatic entrance at the Warner Bros studio event in California by arriving on stage in one of the robotaxis – a low, two-seater concept car with no steering wheels or pedals.

Mr Musk said production will start in 2026 and the vehicles will be available for customers to buy for less than $30,000. They will cost 20 cents a mile to operate, he said.

“The vast majority of the time, cars are just doing nothing … but if they are autonomous, they could be used five times more, maybe 10 times more,” Mr Musk said.

Tesla stock dropped 8.78 per cent to $217.80 a share at market close on Friday after closing almost 1 per cent down on Thursday. The company lost more than $65.28 billion in market value in 24 hours to $682.47 billion on Friday.

Last week Tesla said it delivered 462,890 vehicles in the quarter ending on September 30, falling short of analysts' expectation of 463,310 deliveries. It produced 469,796 vehicles in that quarter.

London-based investment bank Barclays said the new announcement focused on Mr Musk’s long-term vision for a fully autonomous future rather than providing any immediate opportunities for Tesla, leaving investors wanting more concrete details.

“As expected, like prior Tesla product unveils, the event was light on the details, and instead emphasised the vision underpinning Tesla’s growth endeavours in autonomous vehicles,” Barclays said in a research note.

Tesla did not provide details on potential opportunities, including its much-awaited low-cost electric vehicle model, which is expected to be launched in the first half of 2025. It also did not offer updates on the progress of its Full Self-Driving (FSD) system.

Currently available as a beta version, FSD includes features such as automatic lane changes, navigation on highways and traffic light recognition. However, the system still requires human supervision and is not yet considered fully autonomous.

Is Elon Musk running out of tricks?

“Elon Musk has run out of tricks … consumers and investors are now seeing through this marketing exercise that is full of empty promises,” Neil Campling, founding partner at Chameleon Global Capital Management, told The National.

“Where is the Roadster? Where is FSD, marketed since 2020 but [which] does not exist because it requires level 4 autonomy which is not legalised in the US. What happened to the one million robotaxis due on the road by the end of 2022, promised back in 2019.”

For the past many years, Mr Musk has promised a $25,000 Tesla car, which investors viewed as key tactic to attract new customers.

However, it was reported in April that the company has shuttered this project, causing the company's stock to drop. It was followed by a social media post from Mr Musk that Tesla would reveal a robotaxi on August 8, but the event was delayed by more than two months.

“Tesla indisputably brought about a revolution in this area … but it will still have to translate its demonstration of vision into practice, obtain permits from regulators and actually put these cars on the road,” said Hani Abuagla, senior market analyst at XTB Mena.

“How it will ultimately use its technologies is questionable, as is whether it will manage to monetise its software well.”

Tesla’s 'toothless' robotaxi

Referring to Tesla’s robotaxi as “toothless”, John Colantuoni, an equity analyst at Jefferies, said the company did not provide verifiable evidence of progress towards automated driving features or quantify how many robotaxis it plans to make, Bloomberg reported.

“We were overall disappointed with the substance and detail of the presentation. As such, we anticipate Tesla to be under pressure following the event,” Morgan Stanley wrote in a note on Friday.

However, shares of companies such as Uber and Lyft, which are also working to implement more sustainable mobility solutions, surged on Friday. Uber’s stock jumped 10.81 per cent and Lyft’s expanded 9.59 per cent.

“The market wanted more nuance around timing and they were expecting details around a lower cost vehicle … I think long term investors could find bargains if they are patient,” Vijay Marolia, founder and chief investment officer of Florida-based Regal Point Capital Management, told The National.

Tesla is expected to announce its third-quarter earnings on October 23. In July, the company predicted sluggish vehicle volume growth in 2024 after reporting a 45 per cent annual drop in June quarter net profit to more than $1.4 billion. In the same month, it recalled more than 1.8 million vehicles in the US due to a bonnet defect that could increase the risk of a crash.