Written by Cláudio Afonso | LinkedIn | X
Tesla shares soared more than 9% in pre-market trading on Monday, reaching $349.50, following a Bloomberg report on Sunday that President-elect Donald Trump’s transition team is prioritizing a federal framework for regulating autonomous vehicles.
According to the report, a bipartisan measure is in early discussions in Congress to establish federal rules governing self-driving vehicles. RBC Capital analyst Tom Narayan released a new research note on Monday, commenting on the implications for Tesla as the firm attributes 33% of its valuation to the AV business.
“As we discussed last week, federal deregulation on autonomous vehicles would be a positive for Tesla shares. Robotaxis account for 44% of our valuation. We also think this has implications for FSD, which we believe will ultimately reach Level 4 status. Federal deregulation would help here as well. FSD accounts for another 33% of our valuation and we see private AVs becoming living rooms, bedrooms and offices on wheels. These will also be purpose built vehicles,” Narayan stated.
However, the analyst pointed to challenges the company faces in proving the viability of its camera-based Full Self-Driving (FSD) system compared to competitors.
“While we do see federal deregulation on AVs as a positive for Tesla, the company still has a ways to go to prove that its camera based system will ultimately work with limited interventions. As we understand it, FSD’s next version (13.0) is tracking at ~10k miles before intervention, compared to Waymo’s 17k level. Moreover, in states like California, getting robotaxi licenses might mandate using lidar systems. It is unclear to us if creating a federal AV policy framework would supersede,” he noted.
Tesla aims to reach volume production for the Cybercab by 2026, targeting output of 2 million vehicles annually without a prolonged ramp-up. At the last earnings conference call, CEO Elon Musk stated, “We do feel confident in Cybercab reaching volume production in 2026—not just starting production but achieving volume production of at least 2 million units per year (when ramped).”
Tom Narayan also commented on the potential impact that the elimination of the $7,500 EV tax credit would have saying that the company noted that “it would be a net positive given that Tesla has a cost advantage over other EV makers.”
“We still believe that last week’s press surrounding the new administration’s proposed attempts to eliminate the $7,500 credit for new EV purchases would be a net negative to Tesla. Management did say in its Q3 result call that it would be a net positive given that Tesla has a cost advantage over other EV makers. While this later point might be true, we think Tesla’s real competition is not other EV makers, especially in the US where EV penetration is still in the single digit percentages,” the analyst said.
Narayan said federal deregulation on AVs would be “a bigger positive than eliminating the $7,500 credit would be.”
“Rather, competition is ICEs and IRA federal credits are an important aid to re-accelerate EV demand which has stalled in recent months. All that said, given that autonomy is a much bigger driver of valuation versus cars, we think federal deregulation on AVs would be a bigger positive than eliminating the $7,500 credit would be,” the analyst concluded.
Tesla plans to launch a ride-hailing service featuring the Cybercab in Texas and California next year. The vehicle will be manufactured using Tesla’s new “unboxed” method, which Musk described as “in its own league” during the company’s third-quarter earnings call.
The Cybercab, Tesla says, will offer automatic climate control, personalized seating, and music preferences, all activated before pickup.
The company aims to roll out its Unsupervised Full-Self Driving (FSD) system by 2025, projecting that it will be “safer than a human” by then.
Written by Cláudio Afonso | LinkedIn | X
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