Uncertainty abounds for Tesla (TSLA 2.60%) today. Its electric vehicle (EV) sales are now declining, its CEO was an advisor to the President of the United States but how has a frostier relationship, and it is investing in numerous new technologies to try to drive future growth. We are currently witnessing a company at a crossroads; the next few years are crucial for Tesla and the long-term trajectory of its stock price, currently at a current market value of $1 trillion.
Here's my prediction on what comes next for Tesla, and what it means for the stock going forward.
NASDAQ: TSLA
Key Data Points
More EV competition, especially abroad
In the last few years, EV competition has come for Tesla's dominant market position. In the United States, Tesla's market share of new EV sales has dropped to 43.5% compared to 75% at the start of 2022, a trend that may continue with the growing presence of EV products from legacy car manufacturers and others.
Outside of the United States, the numbers look even worse. In China -- one of Tesla's largest markets -- the company is getting pummeled by local players like BYD, which now sells more cars globally than Tesla by a wide margin. Tesla's delivery numbers are moving in the wrong direction.
All this has led Tesla to aggressively drop its selling prices for new vehicles to try to inspire more customer demand, although this has not done much to turn the tide. Tesla's automotive revenue sank 20% year over year last quarter. Its operating income of $7 billion has been moving in the wrong direction for multiple years now, showing the pressure the EV business is facing with declining volumes and selling prices.
I predict more pain for Tesla's EV sales over the next few years with the rising supply of cars available from competitors around the globe, especially from China.
Image source: Getty Images.
Delayed new initiatives, as usual
Tesla has promised for years an expansion away from just EV sales. This includes into renewable energy, robotics, artificial intelligence (AI), and self-driving robotaxis to help take the stock to the next level. While the company's battery pack business has had some semblance of success -- generating $2.7 billion in revenue last quarter and growing 67% year over year -- the rest of these initiatives keep getting hyped and then delayed.
Most important is the robotaxi and self-driving car initiative. Elon Musk has claimed for a decade that self-driving Tesla vehicles are just around the corner from being released to the public. He is saying so again with the potential launch of Tesla robotaxis with no humans at the wheel in Austin, Texas, which was supposed to happen on June 12. Now, the delay is for a release later this month, although I wouldn't cross your fingers. Tesla has claimed launches such as these repeatedly in its history, most famously with the "one million robotaxis on the road by the end of the year" proclamation in 2019.
While it isn't impossible for Tesla to finally accomplish its robotaxi goal, the odds should be against this occurring given how many times it has been promised and then failed to happen. Why would this time be any different?
TSLA PE Ratio data by YCharts
What it all means for Tesla's stock price
A lot of Tesla's stock price is betting on the future potential of the company's initiatives outside of traditional EV sales. Most recently, Elon Musk claimed that robotics could help Tesla's market cap get to $30 trillion, making it by far the most valuable company in the world.
That idea may seem fanciful compared to its current market cap of $1 trillion, but investors need to back off this optimism and return to reality. Humanoid robots are still in the very early stages of development, and it is unclear whether Tesla is the leader here. Robotaxis have failed to launch time and time again. The Cybertruck was a major flop and likely lost the company billions of dollars.
All we have left is a small energy storage business with low margins and a declining EV business. At a price-to-earnings ratio (P/E) of 175, Tesla stock looks like a poor bet for investors today. My prediction is more pain for shareholders in the years to come.
