What Elon Musk’s Big Bet Means for Tesla

Colin’s Note: Elon Musk has just pulled off a miracle…

He’s convinced folks that the new Tesla model previously slotted for a late-2025 release may be hitting production lines by late this year and brought a much-needed boost to Tesla’s beaten-down share price.

There’s just one problem… much of Tesla’s hype right now is centered on the AI-powered Full Self-Driving software that, ideally, would allow the car to drive itself without human interaction necessary.

But the software isn’t there yet… And it may never be. Technology like that demands perfection. Anything less and the consequences could be devastating.

So what does all this mean for Tesla’s future?

I get into it all in today’s video. Click below to watch or read on for the transcript below. And as always, you can pen your thoughts and questions at feedback@brownstoneresearch.com.

Bleeding Edge subscribers, hopefully, you guys are doing well.

On Monday, we said this would be a gigantic week for corporate earnings.

Some of the largest companies in the world are reporting earnings this week. It’s only just unfolding… But I’ll be back on Friday to give you a rundown of what happened and all that unfolds the rest of this week. But today, we’re talking about Tesla.

Yesterday, at 2:30 PST, Elon Musk pulled off a miracle.

For a man who has launched rockets into space and has built numerous billion-dollar companies, this might have been his greatest achievement ever. And it couldn’t come at a more critical time for his company.

All year, shares of Tesla have been reeling. Heading into the first quarter conference call, Elon Musk’s company was down 40% this year. But like a great athlete stepping up when time was running out, Elon Musk delivered one of his finest performances I’ve ever seen.

He somehow convinced investors a new Tesla electric vehicle (EV) that wasn’t supposed to arrive until 2025 might be in production by the end of this year.

Forget the fact that EV sales are down 13% year over year with no sign of recovery in sight. Ignore the fact that we haven’t seen a prototype or even know what the vehicle could potentially look like.

I’ll give Elon Musk and Tesla the benefit of the doubt here. The carmaker has designed and manufactured millions of cars, including the best-selling car in the world. And I have full confidence that they’ll release more popular cars in the future.

But Elon Musk’s magic didn’t end there.

For years, Elon Musk and Tesla have been hyping full self-driving (FSD) software. This is the software that allows the car to drive itself… making turns, changing lanes, and coming to a stop just like a human driver would.

The idea is that one day Tesla’s FSD software will be good enough that a human driver wouldn’t be necessary at all. The Tesla could serve as a robotaxi earning money for Tesla and the car’s owner.

Look, I’ll be the first to admit how exciting the concept of self-driving robotaxis would be. I’ve got two Teslas sitting right out here. Nothing would be more satisfying than having my car zoom off when I’m not using it and earning some money. It’d be great… But the hype around FSD and robotaxis is completely out of control.

Tesla owners who have spent thousands of dollars on the software have convinced themselves it was worth the money over the years. Then there’s a group of people who don’t own a Tesla but see videos of the software working properly. And they imagine how cool it would be to own a car that drives itself.

But the fact of the matter is the software is far from perfect.

I just returned from a road trip to Las Vegas, Nevada, where I used the FSD feature as much as possible. Numerous times, the car made maneuvers and disengaged when I was speeding 85 miles per hour down a highway.

Around town, I had to stomp on the brake to avoid blowing through a stop sign. Now, don’t get me wrong, the FSD software works. It’s actually downright pleasant to have the car do most of the driving, especially on a long road trip.

But I would never sit in the back seat and let the car drive itself, let alone put my family or my children back there and just let the car go. There’s no chance of that.

And there lies the challenge for Tesla.

When perfection is the standard, there’s no upside for the company.

Take, for example, Boeing. The company has manufactured some of the most impressive aircraft in the history of transportation. Boeing’s aircraft has a stellar safety record. Statistically, it’s probably the safest way to travel.

But anything short of perfection for Boeing has devastating consequences.

Tesla’s full self-driving software will be held to the same standards. And, in some ways, it’s going to be worse.

Driving, first of all, is inherently more dangerous and, in many ways, more complex than flying an airplane. Not only that, but Elon Musk, for better or worse, has made himself a lightning rod for controversy.

His conservative viewpoints and actions have made him a target of the liberal news media. If every mistake Boeing makes is bad, every mistake Tesla – and its FSD system – makes will be worse. And that likely won’t be great for Tesla shareholders in the long run.

Over the past 10 years, Boeing shares are up 32%. That’s just over a 3% return a year for a decade. And over the past five years, as Boeing has struggled with safety issues, shares of the company are down more than 50%.

Tesla, believe it or not, is heading down the same path as Boeing.

One where perfection is a standard and anything less will be punishing to shareholders. Now, don’t get me wrong, I really admire Elon Musk. I will also always remain a satisfied owner of a Tesla. They’re great cars. But the company’s FSD software isn’t going to solve any challenges Tesla faces. In fact, it will likely make them worse.

That was The Bleeding Edge for today. I’ll be back again later this week. See you again soon.