JPMorgan Chase pours cold water on Musk: Tesla's Robotaxi won't generate substantial revenue "in the next few years"

With less than two months left until the highly anticipated release of Tesla's Robotaxi, investors are eagerly envisioning how Robotaxi will open a door to the future of travel for Tesla and bring new growth opportunities.

However, at this critical moment, Wall Street giant JPMorgan Chase poured cold water on the excitement.

On Tuesday local time, JPMorgan Chase analysts, including Ryan Brinkman, released a report mentioning a conversation they had with Tesla's Investor Relations Director, Travis Axelrod.

Brinkman stated that despite Tesla's confidence in the commercialization and profit prospects of Robotaxi, this business is unlikely to generate substantial revenue for the company in the next few years. Brinkman cautioned investors not to have overly high expectations for short-term revenue from Robotaxi.

Four Challenges to Robotaxi Profitability

According to Musk, Tesla's most anticipated product this year, the Robotaxi, will debut on August 8th this year, but before that, Tesla must first solve the issue of Full Self-Driving (FSD).

Different from other companies using a multi-sensor fusion approach, Tesla has chosen a unique technology route mainly relying on visual perception, which is expected to significantly reduce the cost of the autonomous driving system and increase the potential for mass production expansion.

However, JPMorgan Chase is concerned that relying solely on visual perception and abandoning sensors like LiDAR may not fully guarantee the system's reliability and safety, thereby affecting the development and regulatory approval of Robotaxi. This is a high-risk, high-reward technological choice that still needs to be tested by the market for its success.

Secondly, the Robotaxi model plan is based on Tesla's next-generation platform, which may take several more years to be launched.

This means that the commercialization of Robotaxi is also constrained by time. Brinkman predicts that even if Robotaxi services start, it will require a gradual increase in capacity, making it difficult to contribute significant revenue in the short term.

The operation of Robotaxi also requires support from intelligent traffic, charging, and other supporting infrastructure, which also requires a significant amount of time and financial investment.

Lastly, there is the uncertain regulatory environment. Brinkman stated that currently, there is no unified standard for the management of autonomous driving vehicles on the road in various countries, which poses obstacles to the promotion of Robotaxi.

Is Tesla Still Far from Fully Autonomous Driving?

Despite the numerous challenges, in the long run, Robotaxi remains an important potential for Tesla to achieve business growth and increase profitability.

JPMorgan Chase believes that once autonomous driving technology matures, the operation of a large-scale unmanned taxi fleet is expected to significantly reduce travel costs and increase vehicle utilization efficiency, thereby creating substantial profit margins.

JPMorgan Chase predicts that with its first-mover advantage and low-cost strategy, Tesla is ultimately poised to dominate this field. However, the prerequisite is that its autonomous driving technology must be thoroughly matured, undergo rigorous safety testing, and gain broad trust from regulatory authorities and the public At this point, Tesla may still have a long way to go.

Although Tesla is vigorously promoting Robotaxi and FSD technology, it has not yet provided a clear commercialization timetable.

Elon Musk previously stated that the performance of Tesla's FSD system is rapidly improving, with increasing accuracy. There are still some technical defects or limitations in the FSD system. Once engineers identify and fix these issues, the system's performance will further improve, and its reliability will greatly enhance.

Once known vulnerabilities are fixed, it will be difficult to even require manual intervention after driving for a year.

Ahead of the upcoming Robotaxi launch event, Tesla has released a new fully automated driving system version FSD v12.4.1, which shows significant improvements and enhancements in performance and user experience compared to previous versions.

About the next generation of models, shareholders' meeting, AI layout

As for the next generation of affordable models, JPMorgan Chase expects that by 2025, it will lead the next wave of growth for Tesla.

However, unlike previous plans, the new model will no longer be based on an all-new next-generation platform, but will instead continue to use existing platforms and production lines.

This strategic adjustment implies that Tesla's cost reduction potential for new models may be limited. Because the existing platform has undergone years of cost optimization, the potential for further significant cost reductions is not substantial.

Axelrod reiterated that Tesla maintains its long-term sales target unchanged. Despite external controversies over its short-term performance, the company remains confident in its long-term growth prospects and is determined to adhere to its established development plans and expansion pace.

Furthermore, JPMorgan Chase expects that Tesla's board of directors will approve Musk's comprehensive compensation plan set in 2018 at this week's shareholders' meeting, which is of significant importance for the company's development.

JPMorgan Chase also pointed out that Musk's broader AI layout through xAI is expected to provide more innovative possibilities and growth momentum for Tesla's future development