Tesla

Tesla surprised investors by announcing that the rumored cheaper, slimmed down Model Y is essentially the same as the standard version, just with fewer color, wheel and seat options, priced at $40K, down 11% from $45K. This move signals that Tesla is becoming more aggressive in selling the Model Y in a post–tax credit world, which should help deliveries grow 16% next year (per Street estimates) compared to a 9% decline this year. I believe a truly affordable $30K model is still in the works for 2027, which will be key to winning autonomy.

September deliveries of 497k were well ahead of the 475k high-end of the whisper, up 7% y/y after being down 13% in June and March. I believe the vast majority of the upside was driven by a 35% quarter over quarter jump in US sales from the tax credit, which in theory means investors should largely throw out the positive number. My "throw it out" logic misses a bigger point; the future will be autonomy and the ability to get EV units in the market profitably is a key competitive advantage. On that measure, the September deliveries are a long-term win for the company.

Patience is both a virtue and a necessity when investing in TSLA. September deliveries will likely exceed a whisper number that has taken off in the past three weeks and now sits between 470–475k. That said, investors will throw away the good news given it was driven by the U.S. EV tax credit pulling demand forward. The real story comes on the September earnings call when we hear about the 2026 outlook and what that means for 2027.

The ending of the U.S. EV tax credit will prove to be a long-term win for Tesla, given it lured traditional automakers into slowing their investment in electrification while Tesla builds an advantage in autonomy. This marks an exclamation point on a consumer shift away from EV adoption that I did not anticipate. I now expect about 25% of cars sold in the U.S. in 2030 to be fully electric, compared with my 50% forecast five years ago. Traditional automakers are more skeptical and see little motivation to prioritize EV investment in the near term. In the end, I stand by my conviction that EVs’ cost and performance benefits, particularly in autonomy, will win consumers over. Traditional automakers are making a mistake by pulling back. By slowing EV development to save costs today, they risk being caught unprepared to capitalize on autonomy tomorrow.

At the end of the month, the U.S. EV tax credit will sunset, which may explain why in August Ford and GM reset their EV plans and in September VW cut its U.S. 2030 EV target to 20%, down from 50% three years ago. This tempered EV outlook contrasts with increasing investments into autonomy, pushing these companies into a Catch-22: saving money by slowing the path to electrification dampens the autonomy reward.

I consider myself grounded in reality. The reality is that a fairy tale Tesla $8.5T market cap is on the table. Tesla’s board has made it clear that they want Elon’s attention on the company, and they are willing to make it worth his time with a potential $1T pay package. The numbers are mind blowing and achievable if Musk commercializes physical AI through FSD, robotaxi, and Optimus. One final lever would likely involve combining Tesla with xAI.

Tesla’s chip deal with Samsung underscores how far ahead it is of traditional car makers when it comes to building physical AI and the long game of autonomy. The AI6 chip (Hardware 6) should ramp in 2027. As a reminder, the company is expected to ramp A15 (Hardware 5) next year. While more powerful hardware is always better, the deal with Samsung raises the question: is Tesla signaling that the breakthrough moment in FSD will be powered by the A16 in 2027? The question comes from the reality that Robotaxi in Austin and the Bay Area remain limited in scope, likely because of the number of interventions in Austin. I expect the stock will trade on concrete signs of progress, including expansion of the service area, number of vehicles, or moving from private to public availability.

Shares of TSLA declined by 4% in after-hours trading as investors wanted to hear more from the company about expected progress this quarter for Robotaxi in Austin. While the disappointment is understandable, it doesn't change the fact that Tesla is still best positioned to capitalize on autonomy and physical AI long term. As for deliveries, they should quicken in mid 2026 as the new, more affordable model begins to aggressively ramp.

Elon’s success at changing the TSLA investment narrative to autonomy has shifted the focus topics for June earnings. Investors will zero in on five topics on the call: 1. Commentary about expansion of the robotaxi service 2. Timing of the new more affordable vehicle or Cybercab 3. Impact of the tax credit sunset on deliveries 4. The typical focus on auto gross margins ex credits. 5. Timing of Hardware 5. I continue to be positive on TSLA given they remain best positioned in physical AI.

For years, EV buyers fixated on range as the key buying metric in response to range anxiety. As Tesla enters the autonomous era, a new metric is taking center stage: the strength of the car’s self driving hardware. A Tesla’s processor and sensor suite (HW3 vs HW4 vs upcoming HW5) now determine how well it can run FSD software and whether it can access future autonomy upgrades. I believe HW5 will be needed for the fleet to go mainstream, and upgrading existing hardware will be cost prohibitive. The bottom line: Tesla is best positioned to be one of the biggest winners in autonomy, despite the reality that rolling out new hardware will be a near term governor on growth.

In June, U.S. EV sales were down 6%, compared to up 9% in March 2025. I believe we will return to growth next year because EV headwinds around tax credits, buyer options, charging infrastructure, and range anxiety are temporary. By 2030, I expect 25% of new car sales in the U.S. will be EVs, up from 8% today. The timeline to mass electrification has stretched, but the economic incentives are still in place for them to eventually account for all vehicle sales. Once mainstream buyers internalize that an EV can cost half as much to “fuel” and meaningfully less to maintain, adoption should accelerate, especially as charging infrastructure scales and compelling sub-$40k options proliferate.

June deliveries came in 4% above whisper expectations and in line with the published consensus. Most investors, including myself, were expecting around 370,000 units, down 17% y/y. Instead, Tesla reported 384,122, a 14% decline. The good news: that -14% should mark the bottom (March 2025 was -13%), with growth rates improving going forward. More importantly, if deliveries hold steady over the next couple of years and the company makes measurable progress on Robotaxi and FSD, the stock should respond positively.