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Stock Strategist

Tesla Goes Bold

Its autonomous vehicle plan has potential, but we're not changing our valuation yet.


 Tesla (TSLA) recently held its first analyst day regarding autonomous vehicles. The presentation by three senior autonomous vehicle team members and CEO Elon Musk was technical and focused on the capabilities of Tesla’s internally developed chip and full self-driving system. We have long considered Tesla one of the leading AV players, along with companies like General Motors, and this presentation confirmed that. This technology is already being put into all Tesla vehicles and, pending regulatory approval, Musk said the vehicles can do full autonomy, known as Level 5, by 2020. This is impressive because no other company claims to be capable of Level 5. For now, Tesla says it just needs to improve its software.

The plan for late 2020 is that Tesla owners will, via an app, place their vehicles into a Tesla ride-hailing fleet when they don’t need them, with Tesla taking 25%-30% of the revenue. These vehicles will mostly be Model 3s because these are Tesla’s high-volume vehicles; when a Model 3’s lease comes to an end, the owner cannot buy the vehicle outright, as is customary, because Tesla will put the vehicle into its fleet. Tesla will also have dedicated AV fleet vehicles for locations with high demand.

David Whiston does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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