(Shell in the title)

by Chris Kirkham

(Reuters) – Tesla action has dropped almost 50% in three months and yet investors are still wondering if the electric vehicle manufacturer held by billionaire Elon Musk, now also a strong man of the US government, is not overvalued.

Tesla’s market capitalization melted by 45% after hitting a historic record of $ 1.500 billion on December 17, thus erasing most of the gains made thanks to the contribution of its general manager to the electoral victory of Donald Trump last November.

Tesla, however, continues to display a valuation much higher than its peers, most investors and analysts who have joined the thesis of Elon Musk according to which the group is not really a car manufacturer, but rather a pioneer of artificial intelligence which will soon trigger a revolution of robotaxis and humanoid robots.

Tesla’s activity in the field of electric vehicles represents almost all of its sales but less than a quarter of its market value, according to a Reuters survey relating to more than a dozen analyzes carried out by banks and investment companies.

Most of its valuation is therefore based on the hopes of autonomous vehicles that Tesla has not yet developed, although Elon Musk has promised each year since 2016 that Tesla without driver would arrive at the latest the following year.

Since December, the Tesla action has been struggling, affected by the drop in vehicle sales and profit, the dissatisfaction of customers in the face of Elon Musk’s political activity, in particular its massive dismissals of civil servants, and the concern of investors who fear that his new function diverts the richest man in the world of hen with gold eggs.

Tesla’s market capitalization remains up by around 65 billion dollars since the presidential election last November, an amount greater than that of General Motors.

Tesla’s total stock market valuation, which amounts to $ 845 billion, still exceeds that of the other nine major highly valued car manufacturers, which collectively sold around 44 million cars last year, against 1.8 million for Tesla.

Investors have long bet on the visions of Elon Musk rather than on the current benefit of Tesla, but the growing gap between the group’s real results and the estimates on future products led some to warn against unreasonable enthusiasm.

“How long will the action be detached from the fundamentals?”, In January wrote Ryan Brinkman, analyst at JP Morgan, after Tesla published mediocre results and, for the first time, a drop in its annual vehicle sales.

Tesla and Elon Musk did not respond to requests for comments.

Bet on the Robotaxi

Elon Musk had promised in 2021 that Tesla would produce cheaper electric vehicles and sell 20 million vehicles per year by 2030, almost double what the world’s largest car manufacturer sells, Toyota, but he gave up this goal last year.

Since then, Elon Musk has presented to investors the objectives of Tesla in terms of Robotaxi and it seems to have been convincing: the Tesla action increased by 71% between last year, in April, and the presidential election of November, even though sales of electric vehicles stagnated and the profits were collapsed.

The course of the action then almost doubled in the weeks which followed the election of Donald Trump for a second mandate at the White House, the analysts having bet that the political influence of Elon Musk would raise the regulatory obstacles to the deployment of a large fleet of Robotaxis de Tesla.

Elon Musk has indeed spent more than $ 250 million to support the Republican candidate’s campaign and is now the main adviser to the United States government in terms of reducing public spending and regulations.

However, Tesla already benefits from limited monitoring from many American states, which control most of the regulations relating to autonomous vehicles. The state of Texas, where Elon Musk promises to launch a paid Robotaxis service in June, even prevented cities from regulating them.

“There is absolutely nothing that prevents him from putting this autonomous driving technology on the market now,” deplores Gordon Johnson, managing director of GLJ Research, who recommends that Tesla action is uncovered. The technology is not ready for the road, he says: “If he put it on the market tomorrow, it would be the end of the case. These devices would wreak havoc throughout America”.

Tesla has been the subject of legal proceedings and federal surveys following accidents, sometimes fatal, involving the driving aid systems that it has marketed under the names of Autopilot and Full Self-Driving (FSD).

Fall in sales

The main activity of the car manufacturer, electric vehicles, is in difficulty: the only vehicle that Tesla has launched since the Y model of 2020 is the cybertruck, a pick-up which sold 38,965 copies in 2024, according to the estimates of Cox Automotive, well below the 250,000 units that the group had initially predicted.

Tesla has also reduced the prices of Model 3 and Model Y in a context of slowdown in global demand for electric vehicles and increased competition, especially in China, where manufacturers offer models from 5,000 dollars.

The new data also shows a sharp drop in sales of Tesla this year on the European market, in a context of support by Elon Musk on the far right in countries like Germany.

Tesla is also due to face Donald Trump’s decisions, which regularly criticizes the electric vehicle industry and has called for the elimination of subsidies and policies that allowed Tesla to generate billions of dollars.

According to the boss of Tesla, the loss of subsidies will affect his rivals more than his group.

The Tesla action is still negotiated at very high prices, measured by the course/benefit ratio, used to determine whether the actions are assessed at their fair value. A high ratio suggests that the action could be overvalued.

The Tesla course/benefit ratio is more than nine times higher than the average of the 25 most valued car manufacturers and four times higher than that of the Chinese car manufacturer byd, which exceeded Tesla last year as the world’s leading seller of electric vehicles.

Unlike Tesla, the Chinese group also has a flourishing activity in the field of hybrid petrol-electricity vehicles, which brought total sales in 2024 to around 4.2 million units, more than double of Tesla deliveries.

Byd’s market capitalization represents less than a sixth of that of Tesla.

The Tesla course/benefit ratio is also more than double or triple of that of the technology giants like Nvidia, Apple, Meta Platforms, Alphabet, Amazon.com and Microsoft, the other six groups which, with Tesla, are known as “Seven Magnificent”.

Optimistic models

Despite the long -standing concerns about Elon Musk’s “personality personality” Brian Mulberry, portfolio manager at Zacks Investment Management, an investor of Tesla, estimates that the billionaire continues to “draw technology up”.

Most of the analysis models examined by Reuters remain optimistic.

In January, three models considered sales of electric vehicles as a relatively minor factor in Tesla’s expected growth.

Truist Securities allocated Tesla’s value to car sales, 21% to autonomous technology services, 17% in Robotaxis and 34% to robots.

An analysis by Bank of America attributes about half of Tesla’s value to Robotaxis and 28% to subscriptions to autonomous driving software.

Ark Investment Management, also an investor of Tesla, provides that the action will reach $ 2,600 by 2029, the Robotaxis representing 88% of the value of the company. He estimates that the group could produce millions of robotaxis by then, generating an annual turnover of around $ 760 billion, more than Walmart, the world’s largest business in terms of turnover.

Tasha Keeney, director of investment analysis at Ark, believes that Tesla will reach such growth by reducing the cost per kilometer of carpooling services, which will make human drivers obsolete.

“It’s cheaper than driving your own car,” she said. “Maybe people will even stop driving,” she said.

The security challenge

It is the American states that regulate autonomous vehicles on public roads, which limits the influence of Donald Trump’s policies. Some, like Texas, have only few regulations, while Tesla’s largest American market, California, demands in -depth tests before granting permits.

If Donald Trump decided to soften the regulations on the Robotaxis, this would benefit all the sector, and not only in Tesla, on a small market currently dominated by Waymo, a subsidiary of Alphabet, which operates hundreds of taxi without driver in cities such as Los Angeles and Phoenix.

While Waymo and most other developers of autonomous driving technologies seek to ensure safety thanks to a series of overlapping technologies, such as artificial intelligence, radar and laser remote sensing (LIDAR), Tesla aims to develop much cheaper Robotaxis, based solely on cameras and artificial intelligence.

However, Mark Spiegel, manager at Stanphyl Capital Partners, believes that Tesla’s approach in terms of robotaxis “does not work safely and will never work without radar or lidar”.

Byd said last month that it would offer – free of charge and standard – a driving aid technology similar to the system that Tesla sells in China for more than 8,000 dollars.

“Byd tells you that autonomous driving has no value,” interprets Gordon Johnson, Glj Research analyst. “In fact, it has so much value that we will offer it,” he added.

(Report Chris Kirkham, with the contribution of Abhirup Roy, Noel Randewich and Geert de Clercq; Diana Mandiá, edited by Kate Entringer)

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