Trusting Tesla, or not...

Tesla held its Tesla Autonomy Investor Day yesterday where the company put forth its vision for the future of self-driving technology enabling fleets of robo-taxis. Overall, sell-side analysts failed to be overly excited, citing previous big announcements and subsequent delays.

Co-founder and CEO Elon Musk did not fail to entertain, boasting Tesla’s achievement of having designed a better chip for self-driving technology than that which Nvidia is currently offering. Nvidia has subsequently refuted those claims saying Tesla showed performance on a whole system and that Nvidia chips in the same system would still perform better. 

Based on its new hardware and expected software updates, Tesla expects fully self-driving cars within the next year. This target seems extremely aggressive given that it requires a public regulatory framework which is basically out of the hands of Tesla. But even more importantly Elon Musk is likely exaggerating how mature the self-driving technology is. Waymo, the Alphabet subsidiary on self-driving technology and perceived as the leader in the industry, has recently said that autonomy level five is maybe two decades into the future.

Tesla aims to divert attention

The Autonomy Investor Day feels as if Tesla is attempting to divert attention away from its troubles in scaling up production and recent disputes with Panasonic about expanding battery production capacity. Sell-side analysts have been lowering their price targets for Tesla shares and consensus opinion is more divided than ever with 13 buy, 8 hold and 15 sell ratings. 

Investors are increasingly worried about demand for Tesla’s cars, driven by the recent miss on Q1 deliveries that raised many questions. Key for Tesla is its credit rating as the company relies on debt financing for its operations. It therefore seems natural that Tesla now puts forth a grand vision to hold up the market value and keep the momentum going. 

As the chart below shows, Tesla’s journey the past two years has been extremely volatile. Elon Musk’s comment “Between now and when the robo-taxis are fully deployed throughout the world, the sensible thing for us is to maximize the number of autonomous units made and drive the company toward cash-flow neutral. Once the robo-taxi fleet is active, I would expect to be extremely cash-flow positive”, should make investors nervous. The strategic shifts lately in Model 3 distribution and now targets for profitability highlights a company with leadership as volatile as its share price.