At the end of the day, Tesla's (TSLA -6.49%) long-awaited and much-hyped debut of its Cybercab probably didn't have the reception that management had hoped for.
Tesla rolled out its long-awaited fully autonomous cab on Thursday at an invitation-only event in Austin. The event, which the company and CEO Elon Musk promoted on social media throughout the day, introduced a fleet of gold-colored two-door Cybercabs that feature distinctive butterfly doors and most decidedly do not include a steering wheel or brake pedal.
"The future is here now. And in the future, there will be millions of Cybercabs everywhere," the company's Cybercab lead, Eric Earley, said during the presentation that was posted on YouTube. Musk did not appear at the event.
Tesla stock rose throughout the day, up 7% at market close, as Thursday’s event drew near. But the rollout failed to impress, and shares began falling again in premarket trading on Friday.
Image source: The Motley Fool.
A government audit
And then on Friday morning, government regulators said they are opening an investigation into Tesla to determine how the company self-certified that its Cybercab meets federal safety standards.
The National Highway Traffic Safety Administration says Tesla told it the vehicles were compliant with federal safety standards and that Tesla planned to expand commercial deployment from Austin to other locations.
"The vehicles lack permanently attached, conventional manual controls, such as a brake pedal, gas pedal, steering wheel, and mirrors," the agency said. "NHTSA is opening this AQ (audit query) to examine the process and technical data on which Tesla relied when certifying the Cybercab and related issues. Among other things, NHTSA will consider the extent to which Tesla's certification depended on determinations that certain (federal motor vehicle safety standards) are inapplicable to the Cybercab."
Tesla stock is down 6% in trading on Friday, meaning the company has essentially given back all the gains it earned in the hours leading up to the much-hyped rollout.
NASDAQ: TSLA
Key Data Points
Does this mean the Cybercab is a dud?
Not really. Just as it would be wrong to make sweeping judgments in the hours before the Cybercab rollout, it would be short-sighted to make them a few hours after the livestream ended. But it's clear that the rollout was extremely short on details and failed to live up to the hype.
Tesla says that Cybercabs will be available starting at 5 p.m. CT on Friday, but only in a limited section of Austin for part of the day. Ashok Elluswamy, Tesla's head of artificial intelligence, said that it will be "next month or so" before the driverless vehicles are available at all times of the day.
That's a much different reality than Musk's optimistic posts on social media in the hours before the event, when he promised "A Storm of Cybercabs."
Morgan Stanley analysts predicted before the event that if investors found it underwhelming, the stock's reaction would be muted, and that's what appears to be happening. Wells Fargo analyst Colin Langan reiterated his "Sell" rating and $130 price target on Friday, implying a 63% downside for Tesla stock. GLJ Research analyst Gordon Johnson also has a "Sell" rating with an extremely bearish $24.86 price target, noting that Tesla failed to provide a rollout target, pricing, or consumer order option. He also noted that Musk did not appear at the event.
What does this mean for Tesla?
In the end, the core thesis for Tesla and the Cybercab is unchanged. Tesla still needs to ramp up production, get approval to use unsupervised Full Self-Driving (FSD) technology on a widespread basis, and live up to the lofty expectations Musk has placed on autonomous driving for a decade.
In the meantime, Tesla will be a volatile stock, but the share price won't reflect Musk's ambitions until Tesla begins to live up to its CEO's hype.
