This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
Elon Musk and Tesla (NASDAQ: TSLA) rolled out their long-awaited Robotaxi autonomous ride-hailing service recently in Austin, Texas. The company has launched with a small fleet that operates within a limited area, with the hope of expanding rapidly, marking a significant milestone as Tesla seeks to gain ground on Alphabet's Waymo.
Tesla stock is up approximately 42% from lows hit in early April. Shares had momentum throughout much of June, but have started to fade since Robotaxi officially hit the streets (down around 9%).
Can Tesla stock hold on to its recent gains, or are shares (down roughly 21% year to date) likely to continue lower? Here is what you need to know.
Robotaxi launches, but it's been a bumpy ride
Tesla's Robotaxi launch came with a lot of hype. Elon Musk mentioned a couple of years ago that Tesla's value hinged on autonomous driving, and some of Wall Street's biggest names have pegged sky-high price targets on the stock because of Rototaxi. So, Robotaxi's recent launch is a big deal.
However, there is some fine print associated with Tesla's early autonomous ride-hailing offerings.
For instance, Robotaxis technically drive themselves, but come with a human Tesla employee in the passenger seat to intervene as needed. Robotaxis are also limited to a defined map, avoid complex intersections, and won't operate in inclement weather.
In the first week since its launch, and despite the restricted use parameters, incidents have already been reported on social media of Robotaxis making mistakes, such as driving in the wrong lane or slamming on their brakes for no apparent reason. It seems Robotaxi isn't as refined as investors hoped, which could help explain why Tesla stock has cooled this past week.
Tesla's sales momentum remains a problem
The immediate problem for Tesla and investors is that if Robotaxi underwhelms, the narrative shifts back to Tesla's actual electric vehicle (EV) business. After all, selling vehicles is still the company's core function.
Tesla's sales have dramatically slumped. Some of the drop is likely tied to the fallout from Elon Musk's efforts in government, which began before last year's election. Politics can be a no-win situation because, regardless of which side you fall on, you're bound to alienate the side that disagrees with you.
The company delivered 336,681 vehicles in Q1 2025, representing a nearly 13% decline from the previous year. Tesla's sales slump may not be entirely due to political blowback; consumers have struggled amid higher interest rates, inflation, and worries about the economy going forward. The vandalism of vehicles and sales centers and the protests that dominated news headlines earlier this year offer some further proof that politics played some role in the slowdown. It also doesn't help that Tesla's Cybertruck has not been well-received by car enthusiasts.
Is there a catalyst to keep Tesla stock on track?
The good news is that things can improve in the coming months. Elon Musk has mostly pulled back from the political scene (at least for the moment), and Robotaxi could still improve its technology as the pilot program progresses.
On the other hand, it's unclear whether the damage to Tesla's brand is permanent, or if not, how long the stench will linger. Additionally, Robotaxi may struggle to expand, at least in the near term, if Tesla's self-driving technology is further behind schedule than hoped.
Data by YCharts.
Tesla's declining sales have weighed on the business, as earnings are also declining, which in turn is ratcheting up the stock's valuation. Tesla's price-to-earnings ratio, currently an excessive 177, could begin dragging the share price down further if the market loses confidence that earnings will rebound anytime soon.
Investors may not have much to hang their hat on until sales rebound or Robotaxi improves. Therefore, Tesla seems more likely to resume its post-election downtrend than to recapture the gains it enjoyed leading up to the Robotaxi launch. It could be wise to stay on the sidelines for now and revisit Tesla once there are more signs of progress.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
