Al Root

Tesla stock was rising in early trading on Wednesday.

Flagging car sales have the company's self-driving ambitions under a microscope. Tesla is weeks away from a planned robotaxi launch in Austin, Texas. The company's self-driving tech, however, might not be up to the challenge.

Shares of the electric vehicle maker were 1.1% higher in premarket trading at $278.44, while S&P 500 and Dow Jones Industrial Average futures were both up 0.5%.

Tesla delivered about 337,000 cars in the first quarter, down 13% year over year. It was the worst quarterly decline in the company's history. Wall Street now projects the company will sell 1.7 million cars in 2025, down from 1.8 million in 2024.

Despite falling sales, Tesla stock was up almost 50% over the past 12 months, heading into Wednesday trading. Self-driving cars are the reason. Bullish investors believe autonomous cars will unlock a new wave of growth for Elon Musk's car maker.

"By a wide margin, Tesla's full self-driving $(FSD)$ software is the largest contributor to our price target," wrote Piper Sandler analyst Alexander Potter in a recent report. He rates shares Buy and has a $400 price target for the stock, valuing the company at about $1.3 trillion.

Given how important FSD is to the stock, Potter hosted a call with Elias Martinez, creator of the FSD Community Tracker. The website keeps track of FSD statistics, such as the number of rides FSD completes without drivers needing to take over and the number of miles between driver interventions.

FSD is Tesla's highest-level driver assistance software available on millions of Tesla vehicles. It's the basis of Tesla's autonomous driving technology. Today, drivers still need to pay attention 100% of the time, taking over when the car does something they are unhappy with.

In May, FSD Tracker said 94% of FSD drives had no "critical disengagement." That's impressive, but it still means 6% of rides needed a human. "After the [investor] call, it seems evident that the current version of FSD software (version 13) cannot support truly autonomous vehicles," wrote Potter.

That isn't what investors want to hear. Failing to start a truly autonomous driving service would be a big disappointment. FSD version 13 might not be the best Tesla has to offer, though. "It has been 4.5 months since Tesla unveiled v13, and since then, no major updates have been released," added Potter. "During this period, Tesla has likely been focused on ensuring a safe launch in Austin; behind-the-scenes progress may not be evident in the tracker."

Martinez suspects that Tesla might be working on things such as Austin maps to help with things such as difficult-to-see stop signs.

Potter's report is an honest look from a bullish analyst at the state of the company's technology. Improvement is evident, but exactly how close Tesla is to launching a truly self-driving taxi service isn't known. The company says it will happen in June.

Investors will just have to wait until then.

Write to Al Root at allen.root@dowjones.com

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May 07, 2025 04:28 ET (08:28 GMT)

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