Thu. Dec 7th, 2023
    Tesla’s Non-Automotive Pursuits Hold Promise for Long-Term Investors

    Tesla’s (TSLA) stock continues to soar, with a 10% increase since the start of the week, driven by factors like the potential for lower interest rates and incentives for electric vehicles in India. However, it’s not just Tesla’s automotive ventures that have caught the attention of investors; its non-automotive pursuits are also gaining traction.

    Goldman Sachs recently released a note titled “Contextualizing Tesla’s AI and FSD Opportunities,” highlighting Tesla’s software products and services, such as hardware, artificial intelligence (AI), and data. The note presents an optimistic outlook on the potential market for Tesla’s full self-driving (FSD) software, which is currently in beta testing.

    According to Goldman Sachs, Tesla’s FSD software already holds an annual revenue value between $1 billion and $3 billion. The company charges an upfront fee of $12,000 or a monthly subscription fee of $199 for its FSD software. Looking ahead, Goldman Sachs projects that the market opportunity for software like FSD could reach $10 billion to $75 billion in annual revenue by 2030, fueled by Tesla’s expanding fleet of vehicles.

    In a best-case scenario, Tesla’s software-related revenue, mostly from FSD, could reach tens of billions of dollars per year by 2030. This valuation could increase further if Tesla licenses its Dojo AI training system or sells FSD technology to other automakers.

    Goldman Sachs also provided revenue and earnings per share (EPS) projections for Tesla’s various businesses by 2030. Excluding vehicles, the software is estimated to be worth $10 billion to $75 billion, services and other offerings (such as the Optimus humanoid and Supercharger Network) at $75 billion to $100 billion, and energy at $30 billion to $50 billion.

    While Goldman Sachs maintained a Hold rating on Tesla stock with a $235 price target, the analysis shows that Tesla’s non-automotive ventures have the potential to contribute significantly to its overall value. However, achieving these projections would require steady-state revenue of $800 billion to $1 trillion by 2040, with mid-high teens EBIT margin.

    While there are potential downsides, such as price reductions, increased EV competition, operational risks, and software development challenges, Tesla’s prospects in non-automotive businesses are becoming more evident.

    In conclusion, Tesla’s non-automotive ventures, particularly its software products like FSD, present a substantial opportunity for long-term investors. As Tesla’s fleet continues to grow, the potential for billions of dollars in annual revenue by 2030 is within reach. However, it’s essential to consider the inherent risks and challenges in achieving these goals.


    What is Tesla’s FSD software?

    Tesla’s Full Self-Driving (FSD) software is an advanced driver-assistance system (ADAS) designed to enable autonomous driving capabilities. It is currently in beta testing, with ongoing refinements and improvements to ensure safety and reliability.

    How much revenue does Tesla’s FSD software generate?

    Goldman Sachs estimates that Tesla’s FSD software already generates annual revenues ranging from $1 billion to $3 billion. The potential market opportunity for software like FSD could reach $10 billion to $75 billion in annual revenue by 2030.

    What are the future revenue projections for Tesla’s non-automotive businesses?

    Goldman Sachs projects that excluding vehicles, Tesla’s software could be worth $10 billion to $75 billion, services and other offerings (such as humanoid robots and charging networks) at $75 billion to $100 billion, and energy at $30 billion to $50 billion by 2030.

    What are the risks associated with Tesla’s non-automotive ventures?

    Potential risks include steeper price reductions, increased competition in the electric vehicle market, operational challenges, delays in key product developments, and regulatory investigations into software capabilities. These factors could impact the growth and profitability of Tesla’s non-automotive businesses.