Tesla gives fans an early Christmas gift

On the surface, Tesla's $1.35 trillion valuation seems wildly out of whack.

As of mid-September, Tesla’s price-to-earnings ratio was between 200 and 209, while its forward P/E ratio was around 140 to 180. For comparison, the average price-to-earnings ratio for the Magnificent 7 stocks — a group of blue-chip tech stocks that includes Alphabet, Meta, Microsoft, Amazon, and others — is approximately 35.

Tesla global deliveries by year

• 2024: 1.79 million
• 2023: 1.81 million
• 2022: 1.37 million
• 2021: 936K
• 2020: 499K
• 2019: 367K
  Source: Statista

Tesla derives approximately 90% of its revenue and 94% of its gross margin from auto sales, yet the company sells fewer than 2 million vehicles per year.

But those important auto sales are starting to falter after years of strong growth.

Through three quarters, Tesla has sold 1.2 million vehicles, its slowest pace since 2022. Tesla is in danger of suffering a second consecutive year of falling auto sales, ending a decade-long run in which the EV maker's sales rose from 76k in 2016 to over 1.8 million in 2023.

“In general, we’d say that the auto business, and numbers overall, have tended not to matter for Tesla stock,” UBS analyst Patrick Hummel said in a recent note.

“We believe when it comes to Tesla, the market is not focused on valuation and rather looking at incremental headlines (which have been, and could continue to remain positive).”

Tesla investors bet on AI, FSD and robots as auto sales fall

Despite the company's sales and demand issues, Tesla shares are up about 6% this year. However, the company has had to claw its way back after spending much of the spring trading about 50% lower than it is currently.

Still, in recent weeks, the company has reached a new post stock split all-time high, driven by excitement about CEO Elon Musk and his vision for a robotic future.

Tesla performance benchmarks for Elon Musk $1 trillion pay package:

• 20 million Tesla vehicles delivered
• 10 million active FSD subscriptions
• 1 million bots delivered
• 1 million Robotaxis in commercial operation
• $400 billion of Adjusted EBITDA over four separate quarters

Tesla investors overwhelmingly voted to approve a pay package that could make Musk the wealthiest man in history.

Related: Tesla gets an answer for its FSD ambitions in Europe

However, to achieve that milestone, Musk must deliver on some lofty expectations for technology that is ancillary to vehicle sales.

According to the pay package, Musk essentially has 10 years to increase Tesla’s valuation from about $1 trillion to $8.5 trillion. 

Musk will also have to convince 10 million people to subscribe to Full Self-Driving.

Tesla gives fans 30-day free Full Self-Driving trial

Tesla has launched a new 30-day free trial of the latest version of Full Self-Driving (Supervised), its advanced driver assistance system.

The trial is available for all new and existing Tesla models with FSD software version 12.3 or later already installed. The trial begins as soon as you update the FSD software, and it can't be combined with any refer and earn benefits.

Related: Tesla CEO Elon Musk admits tough realization about FSD

The trial includes FSD v.14.2, the newest and most powerful version of the system, which is only available on Teslas equipped with its fourth-generation self-driving computer, HW4. Eligible Tesla owners should receive an email or in-app message notifying them that the trial is available.

According to Tesla CFO Vaibhav Taneja, only about 12% of Tesla drivers pay for FSD. FSD revenue fell year over year, according to the company's third-quarter report.

Tesla FSD is a bit more expensive than its competition.

Access to Tesla FSD can be purchased for $8,000 or via a monthly subscription of $99.

Ford BlueCruise first launched in 2021 and is currently available for a subscription price of $49 per month, $495 per year, or $2,495 for a lifetime plan.

Chevy Super Cruise also offers level 2 automation for between $20 and $40 per month, depending on the vehicle, and initial hardware needs to be added, which could cost thousands. But the first three years of connectivity are included with the purchase of a new vehicle.

However, unlike Tesla FSD, Super Cruise and BlueCruise are limited to pre-mapped routes. 

NHTSA opens probe into Tesla FSD system after series of crashes

ADAS technology is still in its infancy, and government regulators are continually working to ensure its safety.

Tesla is already popular at the NHTSA. The electric vehicle maker had ranked third in open NHTSA investigations, with four. Ford and Honda were ahead of it with eight and five, respectively.

Last month, the NHTSA initiated another investigation into 2.88 million Teslas equipped with Full Self-Driving, following more than 50 reports of traffic safety violations and a series of crashes.

The agency says its investigation will focus on “whether certain driving inputs within the control authority of FSD forestall the driver’s supervision when they are unexpectedly performed.”

Even though Tesla says FSD requires drivers to pay attention and intervene when necessary, the NHTSA says it has received reports that the technology has “induced vehicle behavior that violated traffic safety laws.”

Those reports fall into two categories, according to the agency, "The first...scenario involves a vehicle ...proceeding into an intersection in violation of a red traffic signal. The second...involves FSD commanding a lane change into an opposing lane of traffic."

The agency has received 18 reports and seen one media report alleging that a Tesla, operating at an intersection with FSD engaged, failed to remain stopped at the red light for the duration of the traffic signal, failed to stop fully, or failed to accurately detect and display the correct traffic signal state in the vehicle interface.

The NHTSA Office of Defects Investigation also identified six crash reports in which an FSD-engaged Tesla ran through a red light. Four of those accidents resulted in one or more reported injuries.

The ODI has also identified two Standing General Order crash reports, 18 complaints, and two media reports alleging an FSD-engaged Tesla swerved into the opposing travel lanes during or following a turn, or attempted to turn onto a road in the wrong direction, despite the presence of wrong-way road signs.

It is also investigating reports alleging that an FSD-engaged Tesla “executed a turn at an intersection in a through lane despite the presence of lane markings or signals.”

Perhaps most concerning, complaints also allege that FSD did not provide warnings of the system’s intended behavior before making some of these mistakes.

Related: Tesla driver shares FSD safety flaw in a concerning video on X