Tesla's profitability is facing significant challenges, and Elon Musk has staked the company's future on a promise that remains largely unfulfilled.
The concept of Tesla's robotaxi service has largely been theoretical thus far, yet it is undoubtedly taking shareholders on a wild journey. In June, Tesla launched its ride-hailing service in Austin, Texas, utilizing vehicles equipped with its so-called full self-driving (FSD) technology. During the introduction, CEO Elon Musk set an ambitious target to reach half of the U.S. population by the end of the year. However, by October, this goal was scaled back to just eight to ten metropolitan areas. As we enter 2026, the robotaxi service is operational in only two locations—Austin and the San Francisco Bay Area—where the presence of a company employee is still required for rides. Notably, Tesla did not respond to CNN's inquiries regarding the status of its service.
Despite these setbacks, Tesla's shares have surged over 50% since June, reaching record highs fueled by Musk's bold declarations. He previously claimed that the robotaxi service would dramatically transform Tesla’s financial landscape, potentially positioning it as the most valuable company globally. However, the primary revenue stream for Tesla—electric vehicle (EV) sales—has encountered a downturn, experiencing a historic drop of 9% in 2025. This situation renders 2026 a pivotal year for Tesla; the company must deliver on its ambitious robotaxi commitments or risk losing much of the gains it has made.
Ross Gerber, a seasoned Tesla investor and CEO of Gerber Kawasaki, expressed concern, stating, "I believe there’s a reckoning coming for Tesla in the next six months." He pointed out that once analysts recognize the unrealistic nature of the robotaxi projections and the ongoing decline in car sales, Tesla could face substantial difficulties.
American consumers rushed to purchase EVs ahead of a $7,500 tax credit expiration on October 1, which helped Tesla achieve record global sales in the third quarter of 2025. However, following that spike, EV sales plummeted, with overall sales in the U.S. dropping nearly 50% between the third and fourth quarters, as reported by Cox Automotive. Consequently, Tesla’s global vehicle sales fell 16% during the same timeframe, marking a decline for the second consecutive year—a stark contrast to the nearly 50% annual sales growth the company once enjoyed.
Tesla's challenges extend beyond the expiration of the tax credit. There have been negative reactions to Musk's political activities and his connections with the Trump administration, along with heightened competition, particularly from Chinese manufacturers. In fact, Chinese automaker BYD has surpassed Tesla to become the largest seller of EVs globally, despite not having a presence in the U.S. market. This backdrop makes Musk's aspirations for the robotaxi service all the more critical. However, overpromising has been a recurring theme for Musk, who has talked about launching the robotaxi service since 2019.
Moreover, Tesla is falling behind competitors like Waymo, the self-driving vehicle division of Google’s parent company, Alphabet. Waymo announced that it provided 14 million fully autonomous paid rides without any employees on board in 2025, totaling 20 million over the past five years. In contrast, Tesla has yet to offer even one completely autonomous robotaxi ride. Waymo’s services are also available in five major metropolitan areas: Atlanta, Austin, Los Angeles, Phoenix, and San Francisco.
Despite this clear market lead, Wall Street remains optimistic about Tesla's robotaxi service. Dan Ives, an analyst at Wedbush Securities and a Tesla supporter, stated, "I am confident that we will see robotaxis operating in 30 cities by 2026." He emphasized the necessity of a step-by-step approach to achieving what he considers the most crucial growth phase in Tesla's history.
However, such overly optimistic predictions seem to overlook a rocky initial rollout. The Austin robotaxi service has already reported eight accidents to the National Highway Traffic Safety Administration, even with staff present in the vehicles. Additionally, the National Highway Traffic Safety Administration is conducting multiple investigations into the safety of Tesla’s autonomous driving features, raising critics' concerns about whether Tesla's robotaxis will be safe enough for widespread deployment as promised by Musk.
Gordon Johnson, an analyst and vocal critic of both Tesla and Musk, remarked, "He has profited from making promises that are impossible to fulfill. He won’t deliver on them." He cautioned that when a company is losing money in its core business and failing to meet its commitments, it will inevitably lead to a sell-off among investors.
