By Chris Kirkham, Akash Sriram and Abhirup Roy
LOS ANGELES (Reuters) -Tesla and its CEO Elon Musk are walking an increasingly difficult tightrope as the company navigates declining electric vehicle sales and an autonomous driving business that has yet to get off the ground.
On Wednesday’s earnings call, Musk said Tesla is “getting the regulatory permission to launch” robotaxis in several states, including California, Nevada, Arizona and Florida.
He expects operations to reach “half the population of the U.S. by the end of the year” and to roll out at scale by the end of next year.
So far, though, the company is operating only a small fleet in Austin, Texas, that is not available to the general public.
And getting regulatory approvals, particularly in California, is likely to prove a bigger hurdle than Musk described on the call.
“Tesla cannot afford a misstep with the robotaxi service,” said Camelthorn Investments adviser Shawn Campbell, who owns Tesla shares. He added that “the wheels are coming off” its automotive business, with sales declines across “almost every market.”
Sales fell 13% for the first half of this year, as its core EV business deteriorated due to an aging lineup and brand damage from Musk’s political activism. With no affordable vehicles on the horizon until the last three months of the year and the upcoming elimination of a $7,500 U.S. tax break for EV buyers, Musk acknowledged that the company could have “a few rough quarters.”
“The numbers kind of speak for themselves,” said Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management and a Tesla investor. “They’re bad for a growth company, which isn’t growing.”
Tesla shares were down 6% in premarket trading on Thursday. They have declined nearly 18% this year and robotaxis and autonomous driving are critical to maintaining the company’s roughly $1 trillion stock-market valuation.
REGULATORY BARRIERS
The fall in core auto sales has led to more investor scrutiny of Musk’s lofty robotaxi promises. Products such as the Cybertruck have come later than anticipated, and Musk has promised every year since 2016 that driverless Teslas would arrive no later than the following year.
Many questions on Wednesday’s call focused on how quickly Tesla would be able to expand robotaxi services, and the regulatory hurdles that remain.
Musk said he expected the robotaxi business would have a “material impact” on Tesla’s business by the end of next year.
In April, he said it would become material “around the middle of next year,” and predicted “millions of Teslas operating autonomously” by the second half of 2026.
The San Francisco Bay Area was first on Musk’s list of expansion markets, but California regulators told Reuters on Wednesday that Tesla had not yet applied for permits needed to pick up and charge passengers for rides in fully autonomous vehicles.
Companies need a series of permits from both the California Department of Motor Vehicles (DMV) and the California Public Utilities Commission (CPUC) in order to test and deploy autonomous vehicles in the state.
To date, Tesla only has obtained the first in a series of permits needed to launch a service, and spokespeople for both agencies said the company has not applied for the additional permits needed to test and operate autonomous vehicles.
Tesla did not respond immediately to a request for comment.
It disclosed in a filing on Thursday that regulators have asked for information on its robotaxi plans.
California has no specific time period to grant such permits, but Alphabet’s
Tesla has logged just 562 testing miles (904 km) in California since 2016, and has not reported any autonomous-driving miles to the state in six years, according to the most recent state records.
Paul Miller, principal analyst at market research and consultancy firm Forrester, pointed to Musk’s comment about addressing half of the U.S. population “subject to regulatory approvals.”
“That caveat is an important one, as regulatory approvals take time,” he said.
Other markets Musk mentioned could move faster. In Arizona, a state Department of Transportation spokesperson said Tesla contacted state officials last month and had applied for permits to test and operate autonomous vehicles with and without a safety driver.
The agency said a decision is expected at the end of the month. Tesla also must seek permits to operate a ride-hailing service and submit plans to the state for how police agencies can deal with their autonomous vehicles, the spokesperson said.
Nevada DMV officials said they discussed the state’s process with Tesla last week, but no steps have been taken, while officials in Florida did not respond to a request for comment.
Some investors are also seeking more specifics about the Austin launch.
Gene Munster, managing partner at Deepwater Asset Management, a Tesla investor, said he was disappointed the EV maker gave no updates on its earnings call on when the Austin service would be available to the general public or how many vehicles would be on the road.
“It seemed like he wanted to kind of steer clear of really putting hard estimates out there for how things play out,” Munster said.
(Reporting by Chris Kirkham in Los Angeles, Akash Sriram in Bengaluru and Abhirup Roy in San Francisco; Editing by Peter Henderson and Jamie Freed)
Comments