Tesla (NASDAQ: TSLA) recently suffered a sharp 15% decline in its worst trading session since 2020, marking a 51% drop from its all-time high in December. This staggering decrease has wiped out over $700 billion in market value, raising concerns among investors.
Key Factors Behind Tesla’s Stock Decline
The drop in Tesla’s stock price has been driven by multiple factors, including disappointing sales data and growing concerns over CEO Elon Musk’s increasingly political involvement. Additionally, uncertainty surrounding the Trump administration’s trade policies has added further pressure to the market and Tesla’s valuation.
Despite these challenges, billionaire hedge fund manager Ron Baron remains bullish on Tesla’s future, predicting it could reach a $5 trillion market capitalization within a decade. That projection suggests a potential 550% upside from Tesla’s current valuation of $764 billion.
Tesla’s Financial Struggles and Market Share Challenges
Tesla’s fourth-quarter 2024 financial results fell short of investor expectations. The company experienced its first-ever decline in annual deliveries, with sales increasing only 2% to $27.5 billion. Its operating margin also declined by 200 basis points, and non-GAAP earnings rose just 3% to $0.73 per diluted share. The company has now missed Wall Street’s consensus earnings estimates in five of the last six quarters.
Tesla’s struggles have continued into 2025, with weakening consumer demand leading to market share losses in the U.S., Europe, and China. Analysts speculate that Musk’s political activity may be influencing consumer sentiment. However, Tesla still maintains its dominant position in global electric vehicle (EV) sales.
Despite these setbacks, industry experts like Bill Selesky at Argus highlight Tesla’s unique ability to produce profitable electric vehicles, a feat unmatched even by leading Chinese automakers. Furthermore, Musk provided encouraging updates regarding Tesla’s advancements in autonomous driving and robotics during the latest earnings call.
The Future of Tesla: Robotaxis and Autonomous Robotics
One of the most promising aspects of Tesla’s future lies in its robotaxi and autonomous robotics ambitions. The company plans to launch an autonomous ride-sharing service in Austin this June, with expansion to other major U.S. cities later in the year. According to Ark Invest, the robotaxi market could reach $10 trillion by 2030, and Musk believes it has the potential to push Tesla’s gross margin above 70%, a massive improvement from its 19% margin in 2024.
Morgan Stanley analyst Adam Jonas predicts that Tesla could deploy 900,000 robotaxis by 2035, each generating approximately $19,200 in annual net income. By 2040, Jonas expects the fleet to expand to 7.5 million vehicles, potentially contributing $120 billion to Tesla’s net income.
Hedge fund billionaire Ron Baron is even more optimistic, estimating that each robotaxi could contribute between $30,000 and $50,000 in profits annually. In this scenario, a fleet of 900,000 robotaxis could generate $45 billion in net income, while a fleet of 7.5 million could produce a staggering $375 billion in annual profit.
Although these projections rely on multiple assumptions regarding costs and consumer adoption, the sheer potential of Tesla’s robotaxi business has captured the attention of both analysts and investors. The coming years will determine whether Tesla can transform its technological advancements into tangible financial success and solidify its position as a dominant force in the autonomous vehicle industry.
