Tesla: pay for the car business, get autonomy for free, or not
Tesla is three businesses sold at one price: a car maker whose margins are falling, an energy storage business growing quickly from a small base, and an autonomy option that may be worth a great deal or very little.
We separate them and rate the stock a Hold. The market pays full price for the cars and then adds a premium for autonomy; our target of $310 sits slightly below the current price.
Company overview
Tesla makes electric vehicles, stationary battery storage and the software that links them. Vehicles still produce most of the revenue, while energy storage is the fastest growing line and the most profitable per dollar of sales.
The company also sells full self-driving software and operates a charging network that other manufacturers are beginning to use.
- Headquarters
- Austin, TX
- Founded
- 2003
- Employees
- ~125,000
- Market cap
- ~$1.0T
- Exchange
- NASDAQ: TSLA
Management overview
Tesla is run around its chief executive, whose attention is divided across several companies. The board's independence and the pay package are recurring governance questions for shareholders.
Sets product and autonomy strategy. Time allocation across other companies is a standing concern.
Finance chief since 2023; steers cost discipline and working capital through the margin squeeze.
Runs vehicle manufacturing across regions and the ramp of new plants, including the Shanghai export model.
Leads vehicle design, now including the cheaper platform that the volume plan depends on.
Other considerations
Investment thesis and considerations
The stock is a bundle. Our approach is to price each piece on its own evidence and see what is left for the autonomy option.
1. The core auto margin is still resetting
Price cuts and a cheaper model mix keep automotive gross margin near the high teens.
Automotive gross margin excluding credits has fallen from the mid-twenties to the high teens in three years. A lower-priced model should lift volume, but it also dilutes the average margin per car. We model volume growth of roughly 8% a year and a margin that stabilizes near 17%, which values the auto business at a multiple more like a premium manufacturer than a technology company.
2. Energy storage is the quiet compounder
Grid-scale batteries are growing faster than cars with a better margin.
Deployments of storage have grown at a rate several times faster than vehicle deliveries, and the business earns a gross margin well above automotive. Demand comes from utilities and data centers that need firm power. We value it on a multiple of forward earnings in line with industrial growth companies and find it supports roughly one fifth of the share price.
3. Autonomy is priced as if it works
The current price embeds a high chance of driverless service at scale within a few years.
Our scenario analysis assigns three probabilities: a limited robotaxi service in a few cities, a broad rollout, and a long delay. The probability-weighted value of the autonomy option is meaningful but smaller than what the market multiple implies. We would turn constructive on a pullback below $270, or on regulatory approval for unsupervised operation outside a pilot area.
Bull case
Bear case
Financial profile
USD billions except per-share data; calendar years.
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue | 53.8 | 81.5 | 96.8 | 97.7 | 96.4 |
| Automotive gross margin | 28.4% | 25.9% | 18.2% | 17.4% | 16.8% |
| Operating income | 6.5 | 13.7 | 8.9 | 7.1 | 5.6 |
| Net income | 5.5 | 12.6 | 15.0 | 7.1 | 6.3 |
| Diluted EPS | $1.63 | $3.62 | $4.30 | $2.04 | $1.82 |
Financial projections
| Metric | 2026E | 2027E | 2028E | 2029E | 2030E |
|---|---|---|---|---|---|
| Revenue | 104.0 | 116.5 | 131.0 | 146.8 | 162.0 |
| Energy share | 11% | 13% | 15% | 17% | 19% |
| Operating margin | 6.5% | 8.0% | 9.5% | 10.5% | 11.5% |
| Diluted EPS | $2.15 | $2.80 | $3.60 | $4.40 | $5.20 |
Key assumptions
- Vehicle deliveries grow about 8% a year, led by the lower-priced model.
- Automotive gross margin stabilizes near 17% with no further list-price cuts.
- Energy storage revenue grows 35% a year; autonomy revenue stays small before 2028.
Valuation profile
| Method | Weight | Value / share |
|---|---|---|
| Sum of the parts | 50% | $318 |
| Scenario analysis | 30% | $305 |
| Forward earnings multiple | 20% | $290 |
| Blended target | 100% | $310 |
The sum of the parts gives automotive, energy and autonomy separate values and carries the most weight. Scenario analysis shows how wide the autonomy option is, and the multiple cross-check keeps the blend honest against peers.
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