Tesla does not look like a great investment right now. The competition from better and cheaper Chinese electric vehicles is savage and Elon Musk’s outspoken political views have tarnished the brand, at least among the eco-conscious liberals who first adopted it. And yet, Musk has just spent $1 billion (£733 million) of his own money on its shares. His investment only makes sense as a bet on its robotics unit – but that is still very high risk for the company’s pugnacious CEO.
No one could ever accuse Musk of not putting his money where his mouth is. While Tesla may be under more pressure than ever, yesterday he sank his own money into buying more shares to add to his existing 15 per cent stake in the company. Put alongside his $1 trillion (£733 billion) pay package, which depends on the company hitting more than $8.5 trillion (£6.2 trillion) in value, more than double the value any company has ever reached, it is a huge show of faith in the success of the business.
After all, who wouldn’t want an electronic servant doing all their chores around the house?
Here’s the problem, however. There is not much sign of Tesla delivering right now. Its core electric vehicle (EV) unit is facing a whole series of challenges. China’s BYD has already overtaken it, measured both by units sold and total revenues, and there are a whole series of Chinese auto manufacturers that are growing just as quickly. Its sales are down by 40 per cent in Europe, largely on account of Musk’s role in Donald Trump’s administration earlier this year. Its model range is getting very dated, with the niche ‘Cybertruck’, released in 2023, the last major launch, while its entry-level Model Y is still waiting for a release date in the crucial US market. It is hardly looking like a company that is going to dominate the world right now, especially compared to the Artificial Intelligence giants that technology investors are obsessed with this year.
There is just one product that could make a difference: robotics. It has already launched its robo-taxis, but it is Optimus, also known as the Tesla Bot, that has genuine potential. An all-purpose humanoid robot, Optimus is designed to help out with everyday tasks around the house, such as cooking dinner, sweeping the floor, or taking the dog for a walk. Musk has already, in his typically bombastic style, described it as ‘the greatest product in the history or humanity’.
There is no question that it could be huge. After all, who wouldn’t want an electronic servant doing all their chores around the house? And yet, most investors are, perfectly understandably, very sceptical. There is very little evidence yet that the Tesla Bot will actually work, or that it can be delivered at an affordable price, while the big advances in robotics are being made, as with EVs, by Chinese start-ups.
A $1 billion investment in Tesla only makes sense right now if you believe that the Bot can deliver. Perhaps Musk knows something the rest of the market doesn’t – but it looks like a very high-risk wager right now.
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