When Elon Musk unveils Tesla’s robo-taxi concept car on Oct. 10 in Los Angeles, it will be the first new product reveal since his prototype Optimus robot two years ago.
In a sign of just how grand the scale should be, he’s reportedly rented out the full Warner Bros. studio lot outside Hollywood. The stakes couldn’t be higher, with Wedbush Securities tech analyst Dan Ives calling the event nothing short of a “linchpin day for the Tesla story.”
While Musk notably tempered expectations going into the Optimus event, this time he’s setting the bar high right from the get-go. “This will be one for the history books,” he posted on Wednesday.
The Tesla CEO has boiled his investment case down to a binary bet on whether his team can crack the code for unsupervised full self-driving (FSD)—a technology so complex he’s likened it to a baby form of artificial general intelligence.
Anyone who doesn’t believe should get out of the stock
Currently his cars can already drive on their own using a sophisticated onboard computer trained on video data harvested from Teslas already on the road. But they may do the wrong thing at the worst time and require constant supervision, like a teenager with a learner’s permit. Eliminating this risk would be akin to Tesla’s very own ChatGPT moment, according to Musk.
This breakthrough would lead to what he has called the single biggest overnight increase in asset value history has ever seen as millions of existing Teslas across the U.S. could be taught to drive unsupervised on their own at the push of download button. Once activated, they could earn $30,000 in robo-taxi fares every year for their owners while they eat, sleep, or work—and that’s a figure Tesla cited in April 2019, so it would be closer to $37,000 in today’s dollars.
That’s why Musk recently had a message to any Tesla investors still skeptical about its autonomous driving ambitions—if this isn’t the stock for you, get out.
“Anyone who doesn’t believe that Tesla would solve vehicle autonomy […] should sell their Tesla stock,” he told shareholders in July. “If you believe Tesla will solve autonomy, you should buy Tesla stock.”
$5 trillion market-cap opportunity
Musk estimates the technology is easily worth $5 trillion to investors, a sum that would make Tesla the most valuable company in the world by far.
Robo-taxis would also begin shifting Tesla’s profits and losses from being dependent on the sale of cars to being more indicative of a software company: licensing out his FSD at high margins with predictable recurring revenue.
Will McDonough, chairman and CEO of asset manager Corestone Capital, argues this kind of subscription-based turnover is just what institutional investors like himself love.
“A car sale is a single moment in time,” he tells Fortune. “This is monthly revenue in perpetuity, and predictive cash flows is what Wall Street wants.”
Competition for Uber and Lyft
But Musk’s ambitions go further. What better car would there be for the job of ferrying passengers back and forth than one built strictly for that purpose? It wouldn’t even need a steering wheel or pedals. That’s the kind of visionary concept he will likely be presenting on Oct. 10.
Such a car could economically compete with an Uber without the hassle and cost of paying the driver. Just the mere mention of Musk’s robo-taxi ride-hailing plans in April sent shares in the market leader tumbling.
Brad Ferguson, president of Halter Ferguson Financial, says research by his firm has shown the ride-share market is underserved in the U.S., a gap Tesla can step into if it can narrow the 10-year lead of its competitors. He hopes the robo-taxi reveal will raise awareness among customers and even companies interested in running fleets of Tesla robo-taxis.
“There is a significant market opportunity for a new entrant to offer rides at scale at $2 per mile or less,” he tells Fortune. “People think of Uber and Lyft as for tourists, but we’ve found most of the ridership is local—they use ride-shares to get to and from work.”
Sentiment on the rise
One of the reasons so much is riding on the outcome of Oct. 10 is that optimism around the robo-taxi event has helped build a floor in the stock, propping up a price that should in theory have tracked this year’s decline in profits.
Current estimates for next year’s earnings foresee only a return to 2023 levels around $3.12 a share, still well below its record $4.07 from 2022. And yet the stock is roughly flat for the year so far, trading at more than 80 times next year’s consensus earnings per share. Nicholas Colas, cofounder of market analysis firm DataTrek, called it a “faith-based stock.”
Fortunately, the timing of the unveiling is perfect.
Sentiment has been improving ever since the Federal Reserve lowered rates by a half percent and signaled more was to come. High borrowing costs have limited consumers’ ability to afford the high monthly payments for a car loan. Moreover, next week’s quarterly vehicle sales data are expected to show the first increase over the previous year since 2023.
Some notable Tesla bulls like Future Fund managing partner Gary Black have warned the event will likely be just another buy-the-rumor, sell-the-fact event if history is anything to go by. But Musk doesn’t seem to think so.
Roadster unveiling?
This might also be because the Tesla CEO has something else up his sleeve. When he delayed the unveiling by two months to make an important design change, he added it would also give the team time to “show off a few other things.”
This could include a second Tesla Roadster. Back in February he promised to unveil it before the year was out following what he called a radical redesign of the 2017 concept car. One aspect that supports this is the fact that Tesla has no current two-seater whose sales it could cannibalize. If the company does reveal it, there would be little risk customers would cancel the purchase of an existing model in favor of waiting for the Roadster.
The invite also has the words “We Robot.” That might indicate Musk could also show off the latest iteration of his Optimus prototype he believes will transform Tesla into an AI and robotics company first.
Tesla didn’t immediately respond to a request for comment.
Corestone Capital’s McDonough could even imagine more news dropping, much like what investors expect at an Apple event, possibly with ties to other parts of Musk’s empire. Integration of his xAI chatbot Grok in Tesla vehicles is a widely speculated rumor. There’s so many possibilities given the breadth of Musk’s businesses.
“The ticker should be E-L-O-N, not T-S-L-A,” McDonough says, “because people are trying to own Elon Inc.”
