Robotaxi progress is inching forward. This week a handful of Robotaxis in Austin dropped safety drivers, more or less in line with Elon’s timing outlined late in October. This progress is noteworthy given the company has been, in its words, paranoid about Robotaxi safety since one accident would trigger a multi-year setback. Elon’s prudence on the topic is understandable, which makes the removal of a handful, my guess is 5 to 10 vehicles, noteworthy. In total, I estimate the company is operating 150 vehicles in Austin and the Bay Area.

On the call, investors will be focused on the timing of adding new cities to Robotaxi along with what % of vehicles do not have a safety driver. I define this topic as an update on the timing of truly autonomous Robotaxis.

My sense is Elon will reiterate his comments from last quarter suggesting they would end this year with 8 to 10 cities, for example Las Vegas, Phoenix, Dallas, Houston, and Miami, which implies adding 6 to 8 new ones. Those new markets will have few, if any, safety drivers. I expect that unchanged outlook will be viewed as a positive by investors.

My prediction is the company ends the year in four total markets, adding two new cities, which will have a 50-50 mix of cabs with and without safety drivers. While this will fall below the 6 to 8 new cities, it will show measurable progress.

What was once a focus of the Tesla investment case has now moved below the fold. That said, deliveries still matter. This year marks uncharted territory given the elimination of the US tax credit.

Taking a step back and looking at December deliveries, Tesla delivered 418k vehicles versus Street expectations of 420k and above the whisper number of 415k. Overall, deliveries were down 16% year over year in December, compared with up 7% in September. Cutting through the noise around the timing of the tax credit expiration, I believe deliveries would have been down about 5% in both September and December, signaling stabilization that should allow investors to remain focused on autonomy. Additionally, I believe these results indicate the first US EV market share gains in a couple of years.

My base case is that deliveries will be down around 5% in the March quarter, which is below the Street consensus of around 12% growth, depending on the source.

I do not expect the company to give specific delivery guidance for March, but I am hoping for high level commentary for the year suggesting deliveries will be flat to up slightly. If that is the case, Street numbers will need to come down, but that reality is largely optics. I expect investors will be satisfied and view a flattish delivery outlook as neutral.

Similar to deliveries, investors obsessed about the gross margin metric before 2025. That said, it is still important to track given it is a read through on the company proving it can deliver high tech like gross margins over time.

A quick recap on where we have come from on auto gross margins ex credits. In 2024, they finished the full year at 15.4%. In March 2025, they dipped to a low of 12.5% and climbed back to 15.4% in September. The Street is expecting 14.4% in December 2025 and 15% in 2026.

I believe there is slight upside to the full year 2026 gross margin metric given the company has more or less been holding price in the absence of the tax credit. The lower cost Model Y and Model 3 announced just after the tax credit sunset were only about 11% lower in price, which is insignificant in the overall gross margin calculation when combined with my expectation that sales of those lower cost versions will be modest at best. As a point of comparison, I estimate the iPhone 16e, which carries a slimmed down price and equally slimmed down features, accounts for only about 20% of total iPhone sales. While there is a light year gap between a $600 smartphone and a $40k car, there is something to be said about tech forward buyers being willing to pay up for better specs.

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