Tesla (TSLA, Financial) hosted its Autonomy Investor Day on April 22. The event was live-streamed and featured presentations by CEO Elon Musk, as well as from members of his autonomous driving development team. Musk made a number of big claims and promises during the event, by far the biggest of which was the announcement that Tesla would have an operational robo-taxi fleet in 2020.
Tesla watchers are no strangers to Musk’s antics, but this latest display was a step above. Indeed, the analyst reaction in the wake of the event suggests that Musk may have stretched reality one time too many.
Timetable is pure fantasy
Adam Jonas of Morgan Stanley has been one of a handful of Wall Street analysts to have incorporated Tesla’s self-driving technology into his financial model for the company. Indeed, nearly a third of the value he ascribes to Tesla comes from what he describes as Tesla Mobility, but which the company now refers to as the Tesla Network. Despite his enthusiasm for the technology, however, Jonas is skeptical of Musk’s aggressive timetable:
“Taking nothing away from Tesla’s tech ... we still think removing the safety driver will take many years (if not decades) to achieve at high scale.”
This view is perfectly reasonable. Indeed, it is one shared by virtually every major player in the autonomous vehicle industry, save Tesla. Google’s (GOOG, Financial) Waymo, widely considered the leader in the autonomous driving race, concedes it will take at least a decade for self-driving cars to be operational in all weather conditions. Ford (F, Financial), another leader in the space, has likewise warned against feeding the public’s overly exuberant expectations.
Not ready for prime time
Before Autonomy Day, Tesla had shown no lead in driverless technology. After Autonomy Day, nothing has changed save the scale of Musk’s promises. Indeed, Musk’s big claims failed to hold up during the 20-minute demo drives offered following the presentation, according to Morgan Stanley’s Jonas:
“Was it perfect? No. Did the driver have to manually intervene/disengage autopilot? On our drive, yes -- one time when the car was about to miss a right-hand turn on a ramp.”
Tesla claims it will have all the bugs ironed out within the next year and expects to be running a fleet of a million robo-taxis in short order. Those are very big promises. Currently, there appears to be little prospect of those promises becoming reality. Even believers in Tesla’s technological edge think Musk is overdoing it here.
A timely distraction
The Autonomy Investor Day was about more than showcasing Tesla’s self-driving technology. It appears it was meant to serve another purpose, namely to distract investors from the company’s deteriorating fundamentals.
With Tesla expected to post dismal first-quarter earnings on April 23, it is unsurprising that Musk would try to deflect attention away from the troubled present to a lighter and happier future. Unfortunately, Musk has tried this gambit so many times in the past that many analysts have started to call his bluff, labeling Autonomy Day as nothing but a shiny distraction.
Shares sold off the day of the event and continued to slide at the open on April 23. It appears the Musk magic is mostly spent. Once dubbed the “Short Buster” by Jim Cramer, CNBC’s most famous market commentator now thinks “P.T. Musk” is a more appropriate moniker.
Verdict
Musk’s big vision for robo-taxis, and for autonomous driving technology as a whole, appears to be colliding with a harsh reality. As we discussed in our last research note, industry competitors are already speaking out for fear that Tesla may taint the whole enterprise with his blase attitude toward safety and overly aggressive promises.
Autonomous vehicles will almost certainly be part of the future, but that future is a lot further away than either Musk or Tesla is willing to admit. Expecting robo-taxis to turn Tesla’s flagging fortunes around would be most unwise.
Disclosure: Author is short TSLA via long-dated put options.
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