The fleet size may reach one million in 2035! Will Robotaxi save Tesla (TSLA.US) at a time when basic car sales are declining?

The Zhitong Finance App learned that Morgan Stanley expects Tesla (TSLA.US) to significantly expand its Robotaxi (autonomous taxi) fleet in 2026. Daimo analyst Andrew Pelcoco and his team expect the Tesla Robotaxi fleet to be on the road will increase to 1,000 vehicles by 2026, far higher than the current 50 to 150 vehicles. The bank also predicts that by the end of 2035, Tesla will have 1 million Robotaxis on the road in multiple cities.

Despite Tesla's overall cautious approach in promoting the Robotaxi business in Austin and San Francisco, the company has recently made progress in removing safety supervisors. Tesla CEO Musk confirmed on Sunday that the company has launched a driverless Robotaxi road test in Austin, Texas, and that the test vehicle was not equipped with any occupants.

It is worth mentioning that Musk confirmed last week that “safety supervisors will be removed from vehicles within the next three weeks.” Since the official launch of the Robotax fleet in June of this year, Tesla has been committed to fully driverless passenger service by the end of the year. In the case of the Robotaxi project, this development is significant and shows that the company's efforts are gradually bearing fruit.

Tesla has been making every effort to expand the Robotaxi fleet to meet the huge market demand facing the platform. Musk previously said on social media that Tesla's Robotaxi service will charge a fixed flat fee of $4.20. He stressed that the company is “extremely cautious” in terms of safety, and Tesla will be equipped with a professional team to carry out remote monitoring and intervention to ensure the safety of the trial operation.

Musk said that Robotaxi is not only a service, but also “the ultimate form of personal transportation,” making travel safer, more efficient and cheaper. Robotaxi will bring huge profits to Tesla and is a “trillion-dollar opportunity.”

Musk also said that the Robotaxi fleet can achieve a high utilization rate (each vehicle runs for more than 40 hours per week), and the gross margin may be as high as 70% to 80%, far exceeding the traditional automobile business. Musk said Tesla's goal is to make driverless cars more than 10 times safer than humans. He mentioned that the safety staffing in the Austin pilot is only a transitional measure, and will eventually achieve complete driverless driving.

To determine whether Tesla's Robotaxi project is on the right track, Daimo analyst Andrew Pelcoco listed the three most critical catalysts: (1) Open Robotaxi services without safety supervisors to the public. The timeline isn't clear yet, but Tesla appears to be getting closer to achieving its goals. (2) Improvement of safety indicators without safety supervisors. As it expands its business in new states and cities in 2026, Tesla's ability to improve safety metrics when increasing the mileage scale without safety supervisors is critical. (3) Cybercab will start production in April 2026. The Tesla Cybercab is a custom-built vehicle (no steering wheel or pedals, only two seats). It is expected to be produced through its advanced integrated unboxing manufacturing process, which will further reduce costs and accelerate promotion over time. According to reports, Damo rated Tesla's stock as “holding and waiting,” and the target price is 425 US dollars.

The basic car sales market is still in a quagmire

Tesla has gone a step further in advancing the Robotaxi business, and most of Musk's energy this year was focused on the company's robotics business layout and pushing shareholders to approve its newly proposed trillion-level compensation plan. At the same time, however, the prospects for Tesla's main business — car sales — are getting bleak.

The electric car maker is facing sales pressure in several major markets. In November, Tesla's sales decline in major European markets worsened further. Even strong growth in demand for electric vehicles in many countries did not stop the company headed by Musk from continuing to lose market share in Europe. According to data from the French Automobile Manufacturers Association, Tesla's new car sales in France plummeted 58% in November, to just under 1,600 units. In Denmark, Tesla's sales plummeted by 49%; in Sweden, it also fell sharply by 59%, showing fatigue for several consecutive quarters.

Although the penetration rate of electric vehicles continues to increase in major European markets, Tesla has not been able to benefit at the same time. In France, the electric vehicle market share surged 9 percentage points to 26% in November, but Tesla bucked the trend and fell. In Spain, Tesla's registrations fell 8.7% in November. Germany, the largest automobile market in Europe, surged 39% in the first 10 months of this year, but Tesla's sales plummeted 50% during the same period, far behind its competitors.

However, in the overall European downward trend, Norway was a rare exception. Tesla's registrations in Norway surged 175% in November, partly due to local uncertainty about future tax incentives for electric vehicles, which prompted consumers to buy cars in advance.

According to the analysis, the reasons for Tesla's weak registration volume include the aging product line, the lengthening renewal cycle for new models, and the political earthquake caused by CEO Musk, such as his public support for Germany's far-right political party AfD, and its activities within the Trump administration. These factors have weakened the brand's affinity for some European consumers. At the same time, Tesla and European regulators continue to face off over the safety and publicity issues of the driver assistance system “fully autonomous driving (FSD)”, which has further affected its market performance.

At Tesla's home base, sales performance was just as poor. According to the latest estimates released by Cox Automotive (Cox Automotive), Tesla sold only about 39,800 vehicles in the US market in November. This figure is about 23% lower than 51,513 vehicle deliveries in November 2024, and is also said to be Tesla's lowest monthly sales volume in the US market since January 2022. Note that Tesla does not publish monthly sales data; the above values are all estimates based on data collected by Cox Motors.

Although Tesla tried to mitigate the impact by increasing discounts, the market still experienced significant adjustments due to the expiration of the federal electric vehicle tax credit policy. Since the federal electric vehicle tax credit policy expired at the end of September, the US electric vehicle market has fallen into a certain degree of chaos. Previously, the market had anticipated a period where waste heat would subside after the Q3 rush wave, but the sales data for November was still bleak.

Following the cancellation of the $7,500 federal tax credit policy, Tesla launched new “standard” models of the Model 3 and Model Y in October. The price was about $5,000 lower than the previous basic version to make up for the losses caused by the cancellation of the tax credit. These new models are expected to make a more significant contribution to sales volume starting next year.

However, Cox believes that the impact of this strategy may be limited. Stephanie Valdés Stratti, the company's director of industry insight, stated, “The decline in sales clearly shows that there is insufficient demand for this standard model, which should have boosted sales after the tax credit expires. Furthermore, sales of the standard edition are eating away at the sales volume of high-end editions, especially the high-end version of the Model 3.”

It is worth mentioning that although Tesla's sales volume fell slightly sharply by 23% year on year in November, Tesla's resilience to risk is actually superior to other electric vehicle companies. According to reports, overall sales of electric vehicles in the US plummeted by more than 41% in November. Since Tesla's decline was less than that of its rivals, its market share rose to 56.7% from 43.1% in the same period last year. Most other car companies rely heavily on tax credit policies to clean up their electric vehicle inventories, and after losing support from this policy, their demand declined much faster than Tesla.

The Chinese market is one of the few highlights. According to preliminary data released by the China Passenger Transport Federation at the beginning of this month, Tesla's Shanghai plant sold 86,700 cars in November, an increase of 10% over the same period last year. Against the backdrop of a general decline in Tesla's global sales, shipments from its Chinese factory have only increased for the third time this year. This is the company's second-highest shipment volume this year, after September's wholesale volume. This growth has become a rare highlight for Tesla in the Chinese market this year. The company is currently facing a situation where global sales are expected to decline for the second year in a row.