Despite recent struggles, Tesla's bold ventures beyond EVs hint that its most transformative and profitable days are yet to come.
Since hitting a peak in 2021, Tesla (TSLA 0.23%) has struggled to build much, if any, momentum. Once trading at more than $400 per share, the stock has been beaten up for the last three years and currently sits at around $185.
While those who invested before 2021 are likely sitting on comfortable gains, those who've invested more recently may not be so fortunate. Perhaps Tesla's best days have already passed, begging the question: Is it too late to invest in Tesla?
Image source: Getty Images.
Explaining Tesla's fall
Tesla's stock dip can largely be attributed to dwindling gross-profit margins. At its peak, Tesla's margins were above 30%, easily the best in the entire auto industry. Today, those margins have receded to 17% which, although still near the top, now face a number of pressures.
The reason for this decline is varied but can be boiled down to a reduction in consumer demand for electric vehicles (EVs). Higher interest rates have dissuaded would-be buyers due to the increased costs of financing a vehicle. In an attempt to stimulate demand, Tesla decided to cut prices in 2023. This, combined with higher costs across supply chains and labor markets, caused margins to tumble.
TSLA Gross Profit Margin (Quarterly) data by YCharts.
However, interest rates will fall eventually, and demand for EVs are likely to rebound as these factors are typically cyclical. Current trends suggest that rates may start to finally decrease by year's end. Naturally, as borrowing becomes cheaper, consumer demand for EVs should rebound.
Furthermore, Tesla stands to benefit from the overall trend in EV adoption around the world. Governments are implementing stricter emissions regulations and offering incentives to encourage EV purchases, creating a supportive environment for Tesla's long-term growth.
Plus, the company is expanding internationally with construction of a factory in Mexico underway and plans to enter India and Thailand in the coming years.
A new Tesla takes shape
Tesla is striving to become more than just an EV company. One of its key efforts right now is building out autonomous vehicles and eventually launching a robotaxi business. Tesla's self-driving technology has made significant strides, and the company is preparing for a worldwide demo of its robotaxi on Aug. 8.
In addition to autonomous vehicles, Tesla is also in the midst of getting its humanoid robot, Optimus, ready for market launch, which is anticipated to happen in 2025. While these endeavors are not yet ready for widespread commercial release, Tesla has made notable progress. Optimus is already being used in Tesla factories, showcasing its potential to enhance efficiency and reduce labor costs across all kinds of industries.
Taking the optimistic route
Critics will point out that Tesla and deadlines don't always mix well. But it is difficult to contend with its ability to eventually follow through. If Tesla can replicate similar levels of success in its robotaxis and Optimus as it has with its EVs, it could transform the company and maybe even society for the better.
While it is difficult to measure the true monetary impact that these two innovations will have simply because no such market exists for these types of products, some estimates put the total revenue of robotaxis at $700 billion a year and Optimus at around $1 trillion. Combined, and if accurate, that means the two would more than triple Tesla's current revenue.
At the risk of being optimistic, I believe Tesla's best days remain ahead and that it isn't too late to invest in one of the most transformative companies of the future. Tesla's ability to innovate and push the boundaries of technology has been a key driver of its success thus far. If it can continue to lead in the EV market while successfully expanding into new areas like autonomous vehicles and robotics, the company could soar to even greater heights.
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