This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
Key Points
- Tesla's sales and margins are falling, but that doesn't mean its robotaxi business is a tactical move to start growing again.
- The optimal use of an electric vehicle is as a vehicle that's frequently run to take advantage of low running costs.
- The robotaxi rollout is risky, but comes with high potential reward.
Tesla (NASDAQ: TSLA) stock is down so far in 2025, but it generated phenomenal returns over the last decade. Such stock performance creates the impression that the party might be over for Tesla's stock, and it's too late to buy in. It doesn't help matters that Tesla's electric vehicle (EV) sales growth has declined so far in 2025 while its margins and market share fall. Much of the hope for the stock seems to rest on the risky rollout of its robotaxi business.
Why Tesla stock is still attractive on a risk/reward basis
Let's not sugarcoat matters; declining sales and margins aren't good news. However, instead of viewing the robotaxi business as the savior of a challenged business, investors should consider it the natural and inevitable evolution of the EV industry.
That's a viewpoint backed up by the fact that other automakers and technology companies have pumped billions into EVs, and notably, developing autonomous vehicles and the software that runs them.
Why Tesla's robotaxi strategy makes sense
The simple reason why is that the high upfront costs and much lower running costs (servicing, maintenance, fuel, etc.) of an EV compared to an internal combustion engine (ICE) mean that the best economic case for an EV should be as a vehicle that is constantly driven, not staying in a garage. In other words, a commercial fleet vehicle, a delivery vehicle, or a robotaxi.
As such, Tesla's robotaxis and full self-driving (FSD) software aren't moonshots to "save" a company in competitive decline; they are an inevitable evolution of the auto industry. Whether they will be successful or not is another matter, but no company stands in a better position to commercialize the opportunity than Tesla.
If you believe this is the case, then there is still time to get in on Tesla's future performance as an investor.
This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.
