Tesla's Self-Driving Taxi Unveiling Sparks Controversy, Sends Stock Plunging

Tesla's Self-Driving Taxi Unveiling Sparks Controversy, Sends Stock PlungingOn October 12, Tesla CEO Elon Musk hosted a grand event at Warner Bros. Studios near Los Angeles, unveiling the highly anticipated self-driving taxi, Cybercab

Tesla's Self-Driving Taxi Unveiling Sparks Controversy, Sends Stock Plunging

On October 12, Tesla CEO Elon Musk hosted a grand event at Warner Bros. Studios near Los Angeles, unveiling the highly anticipated self-driving taxi, Cybercab. However, the unveiling was shrouded in ambiguity and controversy, with Musk providing scant details, leaving investors questioning Tesla's ability to deliver on its promises and causing a significant drop in Tesla's stock price during trading on the New York Stock Exchange.

During the event, Musk showcased a sleek, two-door Cybercab prototype, a Robovan concept, and the upgraded Tesla humanoid robot, Optimus. He claimed the Cybercab would have no steering wheel or pedals, cost under $30,000, and would "hopefully" be in production by 2026. However, Musk's presentation lacked technical specifics and skirted crucial topics like regulatory hurdles and whether the company would own and operate the Cybercab taxi fleet.

The lukewarm response to the unveiling resulted in a sharp drop in Tesla's stock price on the New York Stock Exchange, plunging as much as 10% during the day, marking its largest decline in over two months. The stock ultimately closed down 8.78%, wiping out over $60 billion in market value. This outcome stood in stark contrast to the nearly 70% surge in Tesla's stock price since mid-April, fueled by investor optimism surrounding the self-driving taxi launch.

Concerns over Cybercab sent Uber and Lyft investors rejoicing, leading to a double-digit surge in both companies' stock prices, with Uber reaching a record high. Tesla has a history of failing to meet Musk's timelines for various future products, particularly in achieving full autonomy. As far back as 2019, Musk told investors that Tesla would deploy over 1 million self-driving taxis the following year, but years later, none have hit the road.

"The only concrete thing was the $30,000 price tag on the Cybercab," said Nancy Tengler, CEO of investment firm LafferTengler Investments and a Tesla shareholder. "Those are all big ideas. Is it cool as an idea? Absolutely." Tesla has been selling a system called "Full Self-Driving" (FSD) for years, but the features still require drivers to remain attentive and have not truly achieved full autonomy. Musk said Thursday the company expects to enable Model 3 and Model Y owners in Texas and California to operate the features without supervision sometime next year.

At the event, Musk also showcased the futuristic-looking Robovan concept and the upgraded Optimus humanoid robot. He said the Robovan concept could carry up to 20 people. While he mentioned a production timeline for the Cybercab, he didn't indicate when Tesla might start manufacturing the Robovan. "Investors we talked to expressed a general sense that the presentation lacked hard numbers and timelines," said Tom Narayan, an analyst at Canadian investment bank RBC Capital Markets, in a note. "We expect the stock to go down."

Bloomberg reported in July that the self-driving taxi unveiling was delayed by two months because Musk requested design changes to the prototype. The Cybercab features butterfly-wing doors that open upwards, and it lacks a steering wheel and pedals. Gene Munster, managing partner at growth-equity firm Deepwater Asset Management, took a test drive in one of the prototypes. "They've done a good job on the design," he said. "But the investor reaction is likely to be muted because from a timing standpoint, it's a long way off before the car is in production."

Musk told the audience that Cybercabs would also be available to purchase. When asked about the timeline for buying one, he offered a vague answer. "Maybe," Musk said. "Generally, I'm overly optimistic on timelines, but 2026. I'll put it this way, not later than 2027."

Presidential candidate Donald Trump, in several speeches ahead of the unveiling, hinted that Tesla's self-driving taxis could face regulatory hurdles. At an event at the Economic Club of Detroit, Trump questioned whether anyone truly likes self-driving cars and said he has "concerns" about the technology. "We will ban self-driving cars from being on the road in America, remember that," Trump said. Musk began publicly supporting Trump's presidential campaign in July and has invested millions in his campaign efforts.

Ahead of the unveil, analysts had hoped Tesla would provide more information on the cheaper vehicle Musk previously mentioned, which is slated to be launched in the first half of next year. However, Musk offered no new details, further fueling uncertainty about Tesla's car sales prospects. Tesla will need to deliver a record number of electric sedans and trucks in the coming months to avoid its first annual sales decline.

"We are disappointed by the lack of detail around Tesla's near-term product roadmap," said Garrett Nelson, an analyst at CFRA Research, in a note. "We believe the event does nothing to change the uncertain outlook for the company's midterm performance."