SAN FRANCISCO

Tesla Inc. witnessed a dramatic market rally Thursday as investors welcomed CEO Elon Musk's renewed emphasis on the company's core electric vehicle business, with shares surging nearly 12% in pre-market trading. The stock movement, potentially adding approximately USD 81 billion to Tesla's market capitalization, marked a significant reversal from recent weeks when investors expressed growing concern over Musk's expanding focus on artificial intelligence and robotaxis.

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During Wednesday's post-earnings call, Musk delivered what many analysts considered a crucial reassurance to the market by forecasting 20-30% vehicle sales growth for the coming year. The projection, coupled with promises of an affordable vehicle model and improved production cost efficiency, helped restore investor confidence that had been shaken by recent product announcements centred on everything but traditional automobiles.

"He definitely seemed more passionate and invested in it this time," observed Jessica Caldwell, head of insights at automotive research firm Edmunds. "I feel like so much of Tesla is tied up in the future but we need to figure out how you get there. That's what people needed to hear and they were a little bit better in providing those details than they have been in the past."

The positive market response comes on the heels of Tesla's recent unveiling of its Cybercab robotaxi, a steering wheel-free, pedal-less two-seater vehicle scheduled for production in 2026 with a projected price point below USD 30,000. While that event, which also showcased a 20-seat driverless van and dancing humanoid robots, initially disappointed investors due to limited details about production scaling and regulatory compliance, Musk's subsequent announcement of plans to produce at least 2 million Cybercabs annually has helped contextualise the company's autonomous vehicle strategy.

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However, not all investors share the market's renewed optimism. Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management and a notable Tesla investor, expressed concerns about Musk's divided attention between core operations and new initiatives. "The days were good when Elon slept at the factory. He was there every day, working. Not going to Trump rallies of all things he could be doing," Gerber commented, referencing Musk's public support for the Republican presidential candidate.

The company's ambitious plans for autonomous vehicles face significant regulatory hurdles, particularly in California. While Musk announced that Tesla vehicles could offer paid, driverless ride-hailing services as soon as next year, with testing already underway among employees in the San Francisco Bay Area, he acknowledged the regulatory challenges ahead. "It's not something we totally control," Musk admitted during the earnings call, though he expressed confidence in securing approval by 2025.

Tesla's valuation continues to reflect high growth expectations, with shares trading at 72.75 times forward earnings estimates, significantly above traditional automaker Ford's 5.94 multiple and even surpassing technology giant Microsoft's 30.79 ratio. The strong market response has prompted at least five brokerages to raise their price targets, with a median target of USD 221 according to LSEG data.

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Industry analysts emphasise that while Tesla's futuristic initiatives generate headlines, the company's immediate focus on operational efficiency and market expansion remains crucial. "Capturing sales in today's challenging market and streamlining operations aren't as sexy as self-driving cabs and dancing robots," noted Edmunds' Caldwell, "but they're critical toward funding the company's long-term vision for the future."

As Tesla navigates the delicate balance between current market demands and future technological ambitions, the company's ability to maintain strong fundamentals in its core EV business will likely remain under intense scrutiny. While this week's positive market response provides some breathing room for Musk's broader vision, the pressure to deliver on both traditional metrics and innovative promises continues to shape Tesla's complex market narrative.