Investor confidence in Tesla (TSLA, Financial) has been on the rise recently, driven by optimism about the company's future success. This positive sentiment has contributed to an increase in Tesla's stock price. Reports suggest that the incoming U.S. administration plans to prioritize establishing a federal framework for fully self-driving (FSD) vehicles, which could benefit Tesla significantly.
Currently, companies like Tesla face significant regulatory challenges under existing federal laws when attempting to deploy vehicles without steering wheels or brakes. Although the U.S. Department of Transportation can facilitate the operation of autonomous vehicles through the National Highway Traffic Safety Administration (NHTSA), a Congressional bill is necessary to pave the way for widespread adoption. Discussions are underway for bipartisan legislation that would set federal regulations for autonomous vehicles. If new regulations favor FSD vehicles, Tesla CEO Elon Musk, a major donor to the administration, could benefit directly, as he has heavily invested Tesla's future in autonomous and AI technologies.
The market generally believes that the approval path for unsupervised FSD is more feasible, though not guaranteed. Renowned tech analyst and managing partner at Deepwater Asset Management, Gene Munster, highlights Tesla's unique position in the driverless taxi industry. The company can leverage a combination of asset-light and asset-heavy business models to achieve autonomy. Munster predicts that by the end of this decade, Tesla's operating profit could see substantial growth, ranging from 10% to 155%, depending on the adopted model.
In an asset-light model, Tesla could capture 30% of the driverless market by 2030, with the autonomous business contributing 40% to Tesla's operating profit. In a more asset-heavy model, similar to Waymo's fleet approach, Tesla's operating profit could increase by 62%.
