Investor confidence in Tesla (TSLA, Financial) has strengthened recently, pushing the stock price higher. This optimism is fueled by insights that President-elect Trump's team may prioritize the development of a federal framework for fully self-driving (FSD) cars, a move expected to benefit Tesla significantly. Under current federal regulations, companies aiming to deploy cars without steering wheels or brakes face major hurdles, Tesla being one of them.
The U.S. Department of Transportation, through the National Highway Traffic Safety Administration (NHTSA), can issue rules to promote autonomous vehicles, but a Congressional bill would facilitate their widespread adoption. Discussions are underway on bipartisan legislation to formulate federal regulations for self-driving cars. If these regulations enable FSD vehicles, Tesla CEO Elon Musk, a major donor to Trump, stands to gain as he bets on self-driving and AI technologies for Tesla's future.
The market perceives the unmonitored FSD approval path as more navigable, although there's no guaranteed approval. Tech analyst and Deepwater Asset Management managing partner Gene Munster asserts that Tesla holds a unique position in the autonomous taxi sector by blending lightweight and heavy-asset business models. Munster predicts substantial growth in Tesla's operating profits by the end of the decade, ranging from 10% to 155% depending on the adopted model.
Munster foresees that in a lightweight model, Tesla could capture 30% of the self-driving market by 2030, with autonomous operations contributing 40% to its operating profits. In a heavy-asset model, akin to Waymo's fleet, profits could rise by 62%.
