When you look through the drama over the past day, TSLA shares down 6% is an overreaction. The reason shares are down, of course, is the Federal Government plays a key role in Tesla’s autonomy opportunity. This comes at a time when the ridesharing portion is ready to launch, five years behind the original schedule.

Recall in April NHTSA talked about easing reporting rules for self driving cars, paving the way for next weeks ridesharing launch. In my view, the White House has little to gain in standing in front of autonomy given autonomy is central to physical AI, and for the US to be a leader globally in AI it also needs to be a leader in physical AI. The bottom line, I expect cooler heads to prevail and the Federal Government will continue to support the growth of these services.

Other contours to the Musk Trump feud:

Tax credits. This impacts about 40% of Teslas auto business. Since last falls election, investors have been preparing for the US EV tax credits to go away. Based on my assessment of Street estimates for CY26, I believe only a quarter of analysts have factored in the loss of the credit on next years numbers. Currently the Street is expecting delivery growth of 21% in CY26 compared to down 5% in CY25. I assume that car demand is elastic, meaning it responds significantly to price changes. Based on my calculations, a 15% price increase in the US would reduce 2025 deliveries there by 15% (assuming unitary elastic demand). This would bring overall delivery growth to 14% for the year, below the current Street estimate of 21%. A key consideration in this calculation is that EV demand is increasing y/y.

Brand damage on the Right. Owning a Tesla has become a MAGA symbol. Some of those buyers will be turned off by the Musk-Trump conflict. On the other hand, Elon aligning himself with Trump has had a negative impact to deliveries over the past six months. In the March 2025 quarter, I estimate that dynamic cost the company around 85k deliveries. Those potential buyers on the political left would likely now view Musk in a more favorable fight given he just picked a fight with Trump. Adding those two forces together, I call it a wash.

Tesla will reportedly unveil its robotaxi service on June 12 in Austin. I think of the event more as the launch of a small-scale pilot rather than a commercial launch. The company plans to operate 10 driverless Model Ys inside a geofenced area of the city during the first week, with rides limited to invited users and employees, and each trip monitored by remote operators for safety. CEO Elon Musk told CNBC that the fleet could grow to about 1,000 vehicles “within a few months” if early results meet expectations. That growth will be closely watched by investors.

For those investors, the unveiling is a first step in the company’s next chapter and a proof-of-concept that FSD can be applied to target a large market. I see the trial as the first validation that Tesla’s pivot away from a focus on EVs toward an autonomous, physical AI future is on the way.

In my view, there are only two players that will win in the robotaxi space, Waymo and Tesla. Absent a federal tax on robots, Uber will stick around for the next decade, then fade away given their model, which is centered on human drivers, can’t compete with the low cost of a robot.

Waymo: They’re making progress as the first mover. In Nov-24 we wrote about Waymo’s economics, Waymo’s Too Small For GOOG Investors Today, Over Time That Will Change, and since November, their business has continued to ramp. The punch line of our work last year is I believe Alphabet will spin out Waymo in the next 2 to 4 years, with operating income in 2030 of somewhere between $11B to $28B, driving a valuation of $350B to $850B. The company is now doing over 250k weekly rides, up from 50k last spring, and continuing to expand into new cities.

The biggest difference between Waymo and Tesla is the vehicle cost. Currently, each Waymo vehicle, initially purchased from an OEM, is outfitted with cameras, LIDAR, and radar, bringing the total cost to about $150k per vehicle. In comparison, Tesla’s Model Y costs under $35k to manufacture, with the anticipated Cybercabs eventually costing below $25k. Waymo’s vehicle cost must decrease from the current $150k to around $100k to make the model’s long-term economics attractive. I estimate that servicing 30 to 70% of the U.S. ridesharing market by 2030 would require a fleet of approximately 200k to 460k vehicles, resulting in an annual new vehicle cost of about $4.5B to $10B. Finally, the WSJ has reported that nearly 40% of miles driven by Waymo vehicles are without a passenger, yet still incur expenses.

Maintenance: Another major cost associated with the Waymo model, compared to the Tesla model, is Waymo’s higher operating expenses. As the fleet grows, so does the need for fleet management, primarily including the costs of charging, repair, and maintenance.

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