It's no secret that Tesla's (TSLA +3.75%) valuation isn't based on it being just another car company, even though it's the leading player in electric vehicles (EVs). It's also no surprise to learn that almost everything, in terms of valuation, now rides on robotaxis and on achieving the aim of making publicly available unsupervised full self-driving (FSD) software a reality. However, what's less discussed is that CEO Elon Musk just doubled down on the recent earnings call, which is making the stock riskier.
Why robotaxis and unsupervised full-self driving matter
The importance of robotaxis and publicly available unsupervised FSD (the two are not the same thing, and the latter is likely to lag the former) can't be overstated. They are the key to unlocking value for both investors and Tesla EV owners.
NASDAQ: TSLA
Key Data Points
Not only will their success create a long-term stream of highly lucrative recurring revenue for Tesla via ride-per-mile charging, but they will also drive future sales of Tesla's dedicated robotaxi, Cybercab. In addition, the ability to transform a Tesla into a robotaxi using unsupervised FSD will boost the value of Tesla EVs and the adoption rate of FSD.
Tesla investors are patiently waiting for both things to come to fruition while eagerly monitoring the robotaxi rollout as it expands from Austin and the San Francisco Bay Area to Nevada, Arizona, and Florida, as Musk expects by the end of the year.
Elon Musk doubles down
But here's the thing. Tesla is now aggressively adjusting its operations on the assumption that it will succeed with robotaxis and achieve its unsupervised FSD goals. Musk couldn't have been clearer on the recent earnings call, stating that he was "reticent" to expand Tesla's production "until we had clarity on achieving unsupervised full self-driving. But at this point, I feel like we've got clarity, and it makes sense to expand production as fast as we reasonably can."
However, this isn't just a mission statement; it's a call to arms for production:
- According to Musk, "our intent [is] to expand as quickly as we can our future production."
- Musk also confirmed that the "single biggest expansion in production will be the Cybercab, which starts production" in the second quarter of 2026.
- CFO Vaibhav Taneja said management is projecting a substantial increase in capital spending in 2026, from an estimated $9 billion in 2025, to prepare the company for growth, including investments in artificial intelligence (AI) and Optimus robots.
Why these plans increase risk
It's fair to assume that Tesla's internal projections for earnings and cash generation in 2026 are based on the same assumptions Musk is making over EV and Cybercab sales; otherwise, what is the point of expanding production "as fast as we can"? The question then turns to how feasible Tesla's production and sales plans are, not least given the recent expiration of EV tax credits in the U.S.
Much depends on Musk's feeling of "clarity" over robotaxis and achieving unsupervised FSD. If these aims aren't achieved, then the ramp-up in production, notably with Cybercabs, coupled with the pre-commitment to increasing capital spending to fuel growth, could compromise the company in 2026.
There's no reward without risk
On the other hand, if Musk is right about robotaxis and unsupervised FSD, then it would be a major mistake not to ramp up production in anticipation of future demand. As such, Tesla's preparatory actions are increasing the potential reward for investors, and its robotaxi rollout and FSD development are also potentially increasing the value of Tesla EVs.
Image source: Tesla.
It's possible this thinking is also causing some reticence to deliver lower-cost (say $25,000) vehicles, as robotaxis and unsupervised FSD should increase Tesla EV values anyway.
How to think about Tesla stock
It's easy to fall into the trap of assuming more risk means a less favorable stock proposition. It doesn't; at least it might not, if the potential reward has increased, too. Consequently, the best way to think about the recent events is that Tesla is becoming a higher-risk/higher-reward proposition.
That might not suit all investors, but it's likely to suit investors looking to buy a stock to fill a position at the aggressive end of their portfolio, and the stock will be somewhat derisked if Tesla achieves Musk's aim of eliminating safety drivers in robotaxis in Austin in due course -- something to look out for.
