Tesla’s Cybercab Robotaxi Reveal Disappoints Investors, Stock Drops 9%

Created on 12 October, 2024 • News • 3,417 views • 5 minutes read

Tesla's stock drops 9% after underwhelming Cybercab robotaxi reveal, leaving investors skeptical of its autonomous vehicle ambitions.

Tesla's stock took a significant hit after its much-anticipated "We, Robot" event, where CEO Elon Musk unveiled the company’s vision for a fully autonomous future. At the heart of this event was the debut of Tesla’s Cybercab, a futuristic two-seater robotaxi without steering wheels or pedals. Despite the fanfare, investors were left unimpressed, leading to a 9% drop in Tesla's share price by the end of the day. The decline highlighted the market's growing concern over Tesla's ambitious, yet seemingly distant, vision of a world dominated by autonomous vehicles.

The Cybercab and Tesla’s Autonomous Future

The Tesla Cybercab is designed as an affordable, fully autonomous vehicle aimed at transforming urban mobility. With a price tag expected to be under $30,000, Musk envisions a world where this robotaxi replaces traditional car ownership, drastically reducing transportation costs. The company claims that the Cybercab will have an operational cost of about $0.20 per mile, compared to the $1 per mile typically associated with public transportation.

Musk also revealed plans for a larger autonomous vehicle, dubbed the Robovan, which could carry up to 20 people or goods, offering a solution for high-density transport needs. While these visions are impressive, they remain futuristic, with Musk targeting 2026 for the commercial availability of the Cybercab, and no concrete timeline for the Robovan.

However, Musk’s optimism about the future of autonomous driving was not enough to soothe investors. Tesla’s stock plummeted nearly 9% following the event, with analysts citing a lack of detail about the near-term roadmap.

Investor Reactions: Disappointment and Skepticism

Financial analysts were quick to voice their concerns about the lack of substance at the event. A report from Barclays highlighted that while Musk emphasized Tesla’s growth in AI and autonomous vehicles (AV), the presentation lacked specific updates on the development of Tesla’s Full Self-Driving (FSD) technology. In particular, analysts were hoping for a clearer picture of how Tesla plans to scale FSD and make it a reliable, unsupervised feature.

Jeffries, another investment firm, titled their post-event report “We, underwhelmed,” capturing the general sentiment of the market. According to them, while the concept of the Cybercab is appealing, it offered no tangible near-term opportunity for Tesla. The firm added that the presentation had little to no information on advancements in FSD technology, regulatory hurdles, or the business case for Tesla’s robotaxi vision.

Morgan Stanley echoed similar sentiments, stating that Tesla failed to position itself convincingly as an AI company. They were also disappointed by the absence of details about Tesla’s rumored partnership with Musk’s AI company, xAI. Without concrete information on how Tesla intends to develop its AI capabilities or manage regulatory and technological challenges, analysts found it difficult to justify Tesla’s high valuation.

Uber Benefits from Tesla’s Setback

While Tesla’s stock suffered, Uber saw its shares rise by over 10%, as investors shifted their attention to a more immediate player in the transportation space. Analysts noted that Uber stands to benefit if Tesla’s autonomous driving ambitions are delayed. Tesla's event suggested that fully autonomous robotaxis, as envisioned by Musk, are still years away from being realized. This leaves companies like Uber with a window of opportunity to strengthen their position in the ride-sharing market.

GLOBALT Investments senior portfolio manager, Thomas Martin, told Yahoo Finance that Tesla’s long-term vision posed a potential threat to Uber only if it could deliver on its promises in the short term. Given the lack of clarity around Tesla’s timeline, Uber is in a more favorable position for now. "If Tesla was able to solve automated vehicles and robotaxis in the near term, it would be a problem for Uber. But the devil is in the details," Martin explained.

Uber's share price increase reflects the belief that the company can continue to dominate the ride-hailing market, at least until Tesla can demonstrate significant progress with its autonomous technology. Investors seem to favor Uber's ability to generate revenue in the present, rather than Tesla's speculative future earnings from autonomous driving.

Challenges Facing Tesla’s Autonomous Ambitions

The main challenge Tesla faces in making its robotaxis a reality is regulatory approval. While Musk remains confident that Tesla’s Full Self-Driving technology will be fully operational in the near future, regulators will need to approve the technology before it can be rolled out to the public. As of now, Tesla’s FSD is only available in a supervised mode, meaning drivers still need to be behind the wheel, ready to take control if necessary.

The Cybercab's design, lacking both a steering wheel and pedals, marks a bold departure from current vehicle safety standards. While Musk envisions a future where such vehicles roam freely on city streets, regulators are unlikely to approve a fully autonomous vehicle without a backup system, at least not in the short term. Analysts predict that it will be years before fully autonomous vehicles are allowed on public roads in most countries, especially considering the ongoing concerns about the safety of driverless technology.

Additionally, competition in the autonomous vehicle space is heating up. Alphabet's Waymo is already offering a robotaxi service in several U.S. cities, giving Tesla stiff competition. Unlike Tesla, which is still refining its autonomous technology, Waymo has successfully deployed self-driving cars on public roads, providing real-world data and experience that Tesla will need to match.

A Glimpse into the Future

Elon Musk’s vision for a fully autonomous future is undeniably exciting. A world where people can summon self-driving cars for a fraction of today’s transportation costs would revolutionize urban mobility and reshape the auto industry. However, investors are growing impatient with Tesla’s focus on long-term goals without providing substantial progress in the near term.

While the Cybercab and Robovan represent the future of transportation, Tesla’s immediate challenges lie in proving that its technology is safe, reliable, and scalable. Without clear updates on the development of its Full Self-Driving system, or how it plans to navigate regulatory hurdles, Tesla may continue to face investor skepticism in the coming months.

For now, companies like Uber, which focus on current market realities rather than futuristic visions, are reaping the rewards. Tesla’s journey toward full autonomy is a long one, and the market seems prepared to reward companies that can deliver results today, rather than promises for tomorrow.