The Bottom Line:
- Ark Invest projects Tesla’s stock price to reach $2,600 by 2029, with Robo Taxis contributing to 90% of the company’s enterprise value and earnings.
- Tesla’s vehicle production is expected to grow from 1.8 million units per year to 6-6.5 million by 2029, with Robo Taxis potentially simplifying manufacturing and sales processes.
- Optimus, Tesla’s humanoid robot project, could generate cost savings and capture a significant share of the multi-trillion dollar market for general-purpose humanoid robots.
- Tesla is increasing FSD adoption by offering free trials and a $99 per month subscription option, potentially boosting revenue and gross margins.
- Despite competition concerns, Tesla maintains a dominant position in the EV market, with the Model Y becoming the world’s best-selling car in 2023 and geopolitical factors limiting Chinese EV manufacturers’ ability to compete in the US and European markets.
Ark Invest’s Bullish Forecast: Tesla’s Stock Price to Reach $2,600 by 2029
Ark Invest’s Ambitious Price Target for Tesla
Kathy Wood and Ark Invest are bullish on Tesla’s future, projecting the company’s stock price to reach a staggering $2,600 per share by 2029. This ambitious target represents a more than 14-fold increase from Tesla’s current share price of around $180. This bullish outlook hinges on their belief that Tesla’s Robo taxi business will be a major driver of growth. Ark Invest estimates that by 2029, nearly 90% of Tesla’s enterprise value and earnings will be attributed to this segment. They see Tesla’s Robo taxi service offering superior margins compared to the company’s electric vehicle business.
Factors Supporting the Robo Taxi Launch
Ark Invest’s optimism regarding the Robo taxi launch stems from several factors. First, Tesla plans to unveil a dedicated Robo taxi vehicle in August of 2024, signifying their commitment to this technology. Second, Ark Invest believes that Tesla’s full self-driving (FSD) software is making significant strides. The transition to a neural network architecture and the vast amount of data that Tesla has collected, exceeding 1.3 billion cumulative FSD miles, position them well for achieving superior safety and regulatory approval for their Robo taxi network. Finally, the inclusion of ride-hailing app features in Tesla’s recent earnings report hints at their plans to launch this service, potentially starting with human drivers before transitioning to autonomous vehicles.
Tesla’s Projected Production Ramp-Up
Ark Invest’s bullish forecast also takes into account Tesla’s projected production ramp-up. In their base case scenario, Tesla’s vehicle production is expected to see a flat or slightly positive year in 2024, followed by a significant 45% annual increase until the end of 2029. This translates to a production volume growing from the current 1.8 million units per year to a range of 6 to 7 million by 2029. Ark acknowledges that such exponential growth rates might be difficult to sustain in the long term due to limitations like management capacity and factory expansion needs. However, they believe that Tesla’s Robo taxi business can mitigate these challenges. Robo taxis could potentially require simpler designs compared to personal vehicles, streamlining manufacturing. Additionally, revenue generated by the Robo taxi service can provide Tesla with extra capital to invest in further production growth.
Tesla’s Vehicle Production Growth and Robo Taxi Simplification
Simplifying Robo Taxi Production and Sales
Ark also foresees that most Robo taxis will be sold to fleet operators rather than individual consumers, potentially simplifying the sales process. Robo taxis could require simpler designs compared to personal vehicles, streamlining manufacturing and reducing costs. This simplification in production and sales could help Tesla achieve its ambitious growth targets and capitalize on the immense potential of the Robo taxi market.
Leveraging Existing Infrastructure for Growth
Tesla’s existing manufacturing infrastructure, such as the Giga Berlin Factory, provides a solid foundation for the company’s future growth. The factory already boasts established mass production in Europe, with plans to ramp up capacity to a million EVs per year in the near future. This existing infrastructure not only supports Tesla’s current production goals but also provides a shield against potential future trade barriers, particularly in the face of geopolitical tensions and tariffs on Chinese-made EVs.
Generating Capital for Further Expansion
The revenue generated by Tesla’s Robo taxi service can provide the company with extra capital to invest in further production growth. As the Robo taxi business is expected to contribute significantly to Tesla’s enterprise value and earnings by 2029, it could serve as a crucial source of funding for the company’s ongoing expansion efforts. This additional capital could help Tesla overcome potential limitations in management capacity and factory expansion needs, enabling the company to sustain its ambitious growth rates in the long term.
Optimus: Tesla’s Humanoid Robot Project and Its Potential Impact
Optimus: A Long-Term Game Changer
Optimus, Tesla’s humanoid robot project, is a potential multi-trillion dollar opportunity galloping towards the future. While not the primary driver behind Ark Invest’s bullish $2,600 price target for Tesla by 2029, they see Optimus as a long-term game changer with the potential to reshape industries and propel Tesla’s dominance in automation. Tesla’s expertise in chip design, training computation, and large-scale manufacturing positions them well for this endeavor.
Cost Savings and Market Potential
Ark Invest’s near-term expectation is for Optimus to perform helpful tasks within Tesla’s factories by the end of 2024. If Optimus can successfully replace 10 to 20% of Tesla’s labor hours while maintaining equal or double the productivity of human workers, it could generate cost savings of $3 to $4 billion, translating to a 1 to 2% reduction in manufacturing expenses by 2029. Looking beyond Tesla’s own operations, Ark Invest research points towards a much larger potential market for general-purpose humanoid robots, estimating a global revenue opportunity of around $24 trillion, with half of that coming from the manufacturing sector.
Leveraging Robo Taxi Technology
Tesla is well-positioned to capitalize on the learnings and technology developed for their Robo taxis to become a leader in robots designed for physical movement. If Tesla decides to sell Optimus robots commercially, they could capture a significant share of this multi-trillion dollar market. However, Ark acknowledges that this large-scale commercialization is likely to occur beyond the 5-year time frame considered in their current Tesla stock price model.
Increasing FSD Adoption: Free Trials and Subscription Model
Making FSD More Accessible
Tesla is making a big push to increase adoption of its Full Self-Driving (FSD) technology by offering free trials to new and existing owners and introducing a subscription option of $99 per month. This move makes FSD more accessible to a wider range of consumers, especially compared to the previous $8,000 upfront cost. The subscription model aligns with the growing trend of monthly payments for big-ticket items, potentially making FSD a more attractive proposition.
Leveraging Existing Hardware and Software
By increasing FSD adoption rates, Tesla can leverage its existing hardware and software to generate additional revenue streams, boosting their overall gross margin. This strategy allows the company to capitalize on its investments in FSD development and infrastructure, creating a new source of recurring revenue that complements its core electric vehicle business.
Staying Ahead of the Competition
While whispers of intensifying competition in the EV space grow louder, Tesla appears to be operating on a different playing field. The company’s unique position is further underscored by the absence of any other EV models in the 2023 top 10 bestsellers list. By focusing on increasing FSD adoption through free trials and a subscription model, Tesla is not only generating additional revenue but also solidifying its position as a leader in autonomous driving technology.
Tesla’s Dominant Position in the EV Market Despite Competition Concerns
Tesla’s Unrivaled Market Position
Tesla’s dominance in the electric vehicle market was solidified in 2023 when the Model Y became the world’s bestselling car, dethroning long-reigning internal combustion engine leaders like the Toyota Corolla and RAV4. This achievement highlights the growing appeal of EVs, even against established and trusted brands. The absence of any other EV models in the 2023 top 10 bestsellers list further underscores the clear gap between Tesla and its competitors.
Geopolitical Factors Limiting Chinese Competition
Concerns about escalating competition from Chinese EV manufacturers might be overblown due to geopolitical tensions and recent tariffs. The United States imposed a 100% tariff on Chinese-made EVs, significantly limiting their ability to compete in the American market. The high cost burden makes it unrealistic for Chinese manufacturers to maintain prices competitive with US-made EVs. This trend is likely to be mirrored in Europe, where a sizable portion of the workforce relies on the automotive industry. The European Union, with its 2.4 million direct manufacturing jobs in the sector, has a strong incentive to protect its industry from a flood of Chinese-made EVs.
Tesla’s European Advantage
Tesla enjoys a significant advantage in Europe thanks to its Giga Berlin Factory, which already boasts established mass production capabilities. With plans to ramp up capacity to a million EVs per year in the near future, Tesla’s existing infrastructure provides a shield against potential future trade barriers. This positions the company well to maintain its dominance in the European market, even in the face of increasing competition from both traditional automakers and emerging EV manufacturers.
