Tesla: Robots, Robotaxis, and a Rather Tricky Outlook

Tesla, you see, is at a bit of an interesting juncture. They’ve always been rather good at making pronouncements – grand, sweeping statements that occasionally, and quite impressively, come to pass. The latest report revealed a fascinating, if somewhat perplexing, shift. It’s not enough, apparently, to be the dominant force in electric vehicles. Now, they want to be… well, everything. It’s a bit like deciding you’ve mastered baking sourdough and now intend to single-handedly rebuild the Roman Empire. Ambitious, certainly.

The plan, as it stands, involves scaling back production of the Model S and X – the posh ones, if you will – and repurposing a factory to churn out humanoid robots. A million a year, they say. A million! That’s a lot of robots. It reminds me of a story about a chap who decided to collect bottle caps. Started reasonably enough, but within a year his house was entirely filled. One hopes Tesla has a slightly more robust storage solution. The third generation Optimus is due this quarter, apparently designed for actual mass production. One assumes they’ve ironed out the kinks – the last thing you want is a million robots with a penchant for spontaneous combustion.

And then there are the robotaxis. No steering wheels, you understand. They envision these autonomous vehicles gliding through “dozens of major cities” by year-end, assuming they can navigate the labyrinthine world of state regulations. It’s a bold vision, and it requires a rather substantial investment – over $20 billion in capital expenditures this year, to be precise. Which, when you think about it, is roughly the annual GDP of a small island nation.

A Slight Dip in the Conventional

Now, the conventional auto business. That’s where things get a little… nuanced. Deliveries were down 16% in the fourth quarter – the third time in four quarters they’ve experienced a decline. It’s a bit like running a marathon and realizing you’ve forgotten your shoes. You can still technically finish, but it’s going to be a rather uncomfortable experience. They did see a bump in deliveries in the third quarter, thanks to consumers rushing to take advantage of the $7,500 federal EV tax credit, but the overall trend is downwards.

Auto revenue dipped 11% to $17.7 billion. However, there was a bright spot: Full Self-Driving subscriptions increased by 38% to 1.1 million users. Regulatory credit revenue, which is essentially a reward for being environmentally responsible, dropped by 10% to $401 million. It’s a bit like getting a participation trophy – nice, but not exactly a sign of world domination.

Overall revenue fell 3% to $24.9 billion. Energy generation and storage revenue surged 25% to $3.8 billion, and service revenue climbed 18% to nearly $3.4 billion. Adjusted earnings per share sank 17% to $0.50, beating analyst expectations by a mere five cents. Operating cash flow fell 21% to $3.8 billion. And with $20 billion earmarked for capex, free cash flow is likely to be negative this year. It’s a rather precarious situation, really – a bit like balancing a stack of books on a wobbly table.

So, Should You Buy?

Look, Tesla is a company that excels at disruption. But they’re now disrupting themselves, shifting focus from a (relatively) established market to one filled with unproven technologies. The core auto business is facing headwinds, and they’re pinning a lot of hope on robotaxis and robots.

As a portfolio manager, I’ve seen plenty of companies with grand visions. And I’ve learned that a long track record of overpromising and underdelivering is rarely a recipe for success. Therefore, while the long-term potential is undoubtedly there, I’d recommend staying on the sidelines for now. It’s not that I don’t admire their ambition – it’s just that I prefer a bit more… certainty. After all, there are only so many wobbly tables a portfolio can handle.

2026-02-02 10:54

A Slight Dip in the Conventional

So, Should You Buy?

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