Tesla (NASDAQ: TSLA) is under renewed scrutiny as RBC Capital Markets significantly lowered its outlook for the company’s Full Self-Driving (FSD) and robotaxi segments. On Monday, RBC downgraded its price target for Tesla from $440 to $320, citing a more disciplined capital expenditure strategy and revised assumptions on FSD pricing and robotaxi penetration.
Key Revisions and Findings
FSD Subscription Price:
New Projection: $50 per month by 2026
Current Rate: Approximately $100 per month
Rationale: The competitive landscape has shifted as other original equipment manufacturers (OEMs) increasingly standardize Level 2+ autonomy features, which are used as product differentiators rather than significant profit centers.
Robotaxi Market Share:
Revised Expectation: 10% in both Chinese and European markets
Previous Forecast: 20%
Reason: Intensifying competition in China, where domestic OEMs are poised to dominate the robotaxi space, has forced a downward adjustment in expectations.
Valuation Adjustments:
FSD Valuation: Dropped from $383 billion to $211 billion
Robotaxi Valuation: Lowered from $879 billion to $641 billion
Delivery Growth and Regulatory Credits:
Delivery Growth Forecast for 2025: Reduced from 14% to 11%
Regulatory Credits: Now expected to be $3 billion, down from $4 billion, primarily due to changes in the EU CO2 rule
RBC’s analysts, led by Tom Narayan, noted that these revisions stem from a reassessment of Tesla’s capital expenditure strategy. With CEO Elon Musk signaling an end to the escalating capex on AI infrastructure and a shift toward a more sustainable spending approach, the previous aggressive investment trajectory is being recalibrated. Additionally, cost-sharing with partners like CoreWeave, Oracle, and SoftBank is expected to alleviate some financial pressure on Tesla’s AI initiatives.
Implications for Tesla Investors
Downside Risk:
The new price target of $320 implies significant downside risk, particularly if Tesla does not meet its revised delivery growth forecasts or if the competitive landscape further intensifies.
Market Sentiment:
With Tesla’s shares down by over 40% year-to-date, and the stock trading at historically lower multiples, the revised assumptions could lead to further market volatility if investor expectations are not managed effectively.
Strategic Shifts:
Tesla’s efforts to offload certain AI infrastructure costs to strategic partners signal a move toward a more sustainable growth model. However, the success of these initiatives will be critical in determining whether Tesla can rebound from its current challenges.
Real-Time Data Resources
For those tracking Tesla’s performance and the broader market dynamics, consider leveraging these real-time data resources:
Financial Growth APIAccess detailed metrics on revenue growth, EBITDA, and other key performance indicators to evaluate Tesla’s evolving financial health.
Company Rating APIStay updated on the latest analyst ratings and price targets for Tesla, providing insight into how market sentiment is shifting with the new forecasts.
Conclusion
RBC Capital Markets’ significant revision of its Tesla price target—from $440 to $320—reflects a more cautious outlook on the company’s FSD and robotaxi segments. With revised pricing for FSD subscriptions and lower robotaxi market share expectations in key markets, Tesla now faces a tougher competitive environment. While strategic cost reductions and partnerships could help mitigate some of these risks, investors must remain vigilant as Tesla navigates this challenging period.
