Musk Faces Scrutiny Over Tesla Robotaxi Plans on Earnings Day

Tesla, the electric vehicle giant, is gearing up for a significant day as it prepares to unveil its quarterly results. Investors and analysts are particularly eager to hear from CEO Elon Musk regarding the much-anticipated robotaxi plans. This comes after a recent event that showcased the self-driving vehicle but left many questions unanswered, leading to a dip in Tesla's stock prices. The robotaxi is seen as a crucial element for Tesla's future, and stakeholders are keen to understand how the company plans to navigate the challenges ahead.

During the recent presentation, Musk provided a brief overview of the robotaxi, lasting around 20 minutes, but did not allow for any questions. This lack of engagement has only fueled investor curiosity about the state of Tesla's core business—selling cars. As the company prepares to report its third-quarter results, analysts expect to see a decline in profit margins from auto sales. This drop is attributed to the attractive incentives offered to entice buyers of electric vehicles, which have become increasingly competitive.

Moreover, Tesla is facing its first-ever annual drop in vehicle deliveries. This decline is largely due to the growing competition from more affordable electric vehicles in China and new models from traditional U.S. automakers. A significant portion of Tesla's impressive $700 billion valuation hinges on Musk's assurances that the Autopilot software will be the foundation of its robotaxi business. Analysts are entering the post-earnings call with pressing questions about production timelines and sales strategies.

Musk has indicated that the robotaxi is set to enter production in 2026, with a price tag of less than $30,000. He also mentioned that the unsupervised operation of Tesla's Full Self-Drive (FSD) software is expected to commence next year in California and Texas. However, concerns have arisen regarding the safety of this autonomous software, as the U.S. auto safety regulator has launched an investigation into 2.4 million Tesla vehicles equipped with FSD software following reports of collisions, including a fatal incident.

Despite these challenges, Tesla has reported that its vehicles have driven over 1.6 billion miles using FSD, showcasing the potential of its advanced driver assistance technology. The company is also offering interest-free financing for customers purchasing FSD alongside Model 3 or Model Y vehicles. However, some analysts have shifted their focus back to Tesla's fundamental business performance, especially after the recent Robotaxi Day event.

Wall Street analysts predict that Tesla will report a 14.9% automotive gross margin for the three months ending September 30, a slight increase from the previous quarter's 14.6%. The company has been cutting prices to boost demand amid rising interest rates, but this strategy has had limited success. Analysts believe that these price cuts and incentives, particularly in China, may negatively impact Tesla's profit margins, an area where it has historically outperformed traditional automakers.

As Tesla approaches the end of the year, it faces the challenge of surpassing last year's delivery figures. The company is expected to update its annual forecast, and unless it delivers more than 516,000 vehicles in the fourth quarter—a period typically strong for U.S. car sales—it may see a slight decline in annual deliveries. Analysts predict that deliveries could decrease by 0.3% to 1.8 million units this year.

Despite the hurdles, Tesla's sales in China have shown remarkable growth, rising 66% to 72,000 units in September, marking its best month of the year. The third-quarter sales in China were up 12%, aided by financing deals and trade-in subsidies from local governments. With this momentum, some analysts believe that Tesla could potentially surpass last year's sales record in China during the fourth quarter.

As Tesla prepares to address investor concerns regarding its robotaxi plans and overall business performance, the upcoming quarterly results will be pivotal. The company must navigate a competitive landscape while maintaining its innovative edge. Investors will be watching closely to see how Tesla adapts to these challenges and whether it can continue to lead in the electric vehicle market.