Tesla robotaxis to justify valuation but Tesla Semi waiting for batteries

Posted on 1 Feb 2021 by Tim Brown

During Tesla's fourth-quarter earnings call last Wednesday, Tesla’s CEO, Elon Musk, said there is a “roadmap to potentially justify” its market cap, which has topped $800bn, making it the fifth-most valuable US company.

According to Musk, as Tesla’s self-driving technology continues to improve, Tesla vehicles will become self-driving robotaxis, allowing usage to increase from an average of 12 hours a week to 60 hours a week. Tesla could potentially charge additional fees for those robotaxis, allowing the company to generate much more revenue per car.

Musk also announced that Tesla’s Full Self Driving package will be available on a subscription basis starting in Q1, rather than as a one-time $10,000 add-on, which will allow Tesla to begin adding recurring revenue as it works on improving its self-driving technology.

Musk’s valuation assumes the company will reach around $50bn in annual car sales. Tesla generated $9.31bn in automotive revenue in Q4 and said that vehicle deliveries would increase an average of 50% a year going forward.

“If you made $50 billion worth of cars, it would be like having $50 billion of incremental profit, basically because it’s just software,” Musk said in the introductory part of the call. Based on that formula, Musk says a multiple of 20 times earnings would lead to $1 trillion in market cap — “and the company’s still in high-growth mode.”

For instance, when Tesla began to discuss self-driving technology in 2016, Musk said the company would complete a hands-free trip across the U.S. by late 2017. The company has yet to complete that mission.

Currently, Tesla’s Full Self Driving features include Smart Summon, which lets a driver call their Tesla to roll out from a parking spot to where they are standing, and Navigate on Autopilot, which can pilot the car from a highway on-ramp to an off-ramp, making necessary lane changes along the way. However, significant increases in capabilities are still needed for the vehicles to become full autonomous.

Tesla Semi class 8 truck on hold while battery production increases

During the briefing call, Elon Musk also said that volume production of its class 8 truck, the Tesla Semi, is on hold until Tesla can make a high volume of its 4680 battery cells.

The cells, which Tesla designed and showed off to shareholders at a battery day presentation in September 2020, are large, tab-less lithium-ion cells that the company is making at its pilot battery factory in Fremont, California. 

When Tesla first unveiled its Semi trucks in 2017, Musk said they would be delivered to customers in 2019. In April last year, the company said it would delay Semi production until this year. Now the company has said it will deliver its first Semi by the end of 2021.

“Prototypes are easy, scaling production is very hard,” Musk commented.

Tesla has taken scores of reservations from big name customers for the Semi. Anheuser-Busch, DHL Group, PepsiCo, Pride Group and Walmart put money down for the class 8, battery electric Tesla trucks.

“The main reason we’ve not accelerated new products is — like for example Tesla Semi — is that we simply don’t have enough cells for it. If we were to make the Semi like right now, which we could easily go into production with the Semi, but we would not have enough cells for it right now. We will have enough cells for Semi when we are producing the Tesla 4680 in volume. Basically we do not see any issues with creating a compelling long-range truck with batteries apart from cell supply,” Musk said.