Tesla Grapples With Threats on All Fronts

Elon Musk’s trillion-dollar Tesla paycheck works out to roughly a dollar for every problem facing Tesla.

So far this year, the electric vehicle giant has endured mounting competition both at home and abroad, rising costs from tariffs, and the obliteration of valuable tax credits. Last week delivered a couple of new battles, including an investigation by US safety regulators over potentially deadly door handles and some big new rivals in the robotaxi space. And yet, by Friday, Tesla scored a couple of key brownie points from Wall Street analysts. So why the optimism?

Design Flaws

Tesla is no stranger to recalls, updates and visits from safety regulators — though this one may require more effort to fix. Two weeks ago, Bloomberg published an investigation into the risks of the mostly electronically powered doors found in Tesla cars, including 140 instances since 2018 of dangerous door malfunctions, with some linked to fatalities. Following the report, the US National Highway Traffic Safety Administration opened a probe into Tesla Model Y door handles (regulators in both Europe and China have already been on the case). 

By the end of the week, Tesla’s design chief, Franz von Holzhausen, said on a podcast that the company is “working on” a design fix (notably, the Cybertruck doors have no handles at all and open from both sides using only electrical buttons; manual overrides are tucked away inside the vehicle).

That’s new problem No. 1. New problem No. 2? More competition in the robotaxi space:

• Last Wednesday, Alphabet-owned Waymo said it would team with Lyft to become the first robotaxi service to enter Nashville, with plans to launch in the city next year. A day later, Waymo announced another partnership with Via, a recently IPO’d company that provides software and on-demand rides to public transit systems, with plans to bring robotaxis to public transit networks starting in Chandler, Arizona, this fall.
• Then on Friday, Nvidia announced a possible $500 million investment in self-driving car startup Wayve, which has already been backed by Uber and SoftBank. Wayve offers robotaxi service in San Francisco, Phoenix, Los Angeles, Austin and Atlanta.

Translation: Tesla, which currently only offers robotaxi service in Austin, is falling behind in the robotaxi race.

Optimist Prime: And yet! Things are still looking up for Tesla. Last week’s interest-rate cut from the Federal Reserve is likely to be a big boon for the company (a substantial amount of car buyers finance their purchases), and analysts still see upside for the company. On Friday, Baird analyst Ben Kallo upgraded the company’s stock from hold to buy, highlighting a looming “physical AI inflection” that should boost both Tesla’s robotaxi business and its robotics business, led by its forthcoming Optimus humanoid bot. Meanwhile, Goldman Sachs raised its price target (though not its rating) for Tesla stock last week, from $300 to $395, citing an expected rush of car sales before the $7,500 federal EV tax credit expires at the end of the month.