In the years since I published my Tesla Thesis in July 2020, Tesla’s share price has done well, increasing by c. 4.4 times or c. 32% annualised return. It is the second best-performing “Magnificent Seven” stock after Nvidia.
By comparison, the S&P500 and Nasdaq indices yielded a meagre 15% and 16% annualised return respectively. In asset management parlance, Tesla’s stock has outperformed its peers and comparable equity markets.
As the fine print goes, past performance is not indicative of future results. Where does Tesla go from here at a c. US$1.43 trillion market capitalisation (seemingly overvalued as implied by a price-earnings ratio of c. 230)?
Experiencing the products
Over the years, I’ve driven a Model S, a Model 3 and a Model Y.
The 2017 Model S was delightful but suffered from production quality issues and eventual hardware obsolescence – the older media controller unit could not make full use of new software and a CCS upgrade was required for fast charging. The 2021 Model 3 was more wieldy on UK country lanes and had less production imperfections (e.g. panel gaps, faulty components etc.) but felt like a downgrade from the more spacious and feature-rich Model S.
The 2025 Model Y (Juniper) is the best Tesla I’ve driven – production quality issues have been ironed out and it has most of the features I miss from the Model S and more. To riff on a well-known phrase, “When a man is tired of the Model Y, he is tired of life; for there is in the Model Y all that life can afford” (true until Tesla’s much anticipated sports car, the next-gen Roadster, goes into production).
Chinese competition
Life-affirming cars as they are, Tesla’s electric vehicles (EV) are no longer the only option in the market. When I penned the Tesla Thesis in July 2020, I thought that Tesla’s competitors were far behind; legacy car companies were simply not offering viable alternatives. I did not forsee the rise of Chinese EV makers.
My extended travels in China in 2024 changed my worldview. Chinese EVs are better in ways that matter – they provide more features at lower prices. MKBHD, the eminent YouTuber whose reviews infamously led to the demise of Fisker and a handful of other tech startups, thinks so too.
Chinese EV makers have taken material market share and forced Tesla to lower prices. For now, tariffs on Chinese EVs in major markets like the US and EU give Tesla breathing room and more time to diversify away from EVs.
Energy and robots
Tesla has been successfully diversifying its revenue mix away from the automotive business in the last 3 years. Revenue from its “energy” (grid-scale storage and residential storage/solar) and “services and others” (supercharging, software subscription, insurance and others) segments have been increasing by double digits year-on-year.
The energy business will be a reliable source of revenue growth for years to come. Tesla’s energy storage products (the Megapack and the Megablock) will be in demand as the world transitions to renewable energy and as the proliferation of data centers continues.
The more exciting (but speculative) business is “services and others” under which autonomous robots will feature prominently:
- Robotaxi – fully autonomous ride-hailing service using Model Y vehicles with full self-driving (FSD) software or the purpose-built Cybercab – underpins Tesla’s outsized valuation. Cathie Wood’s Ark Invest estimated that the potentially high margin Robotaxi business will account for c. 63% of Tesla’s revenue mix. As of writing, Tesla has launched a limited service in Austin, Texas with human supervision (i.e. not fully autonomous). Full self-driving (FSD) software has made progress but is far from perfect.
- The Optimus humanoid robots represent an entirely new product category, and critics argue that demand remains unproven. Elon Musk, however, calls it the “biggest product ever of any kind”. I think he’s right – it’s a safe bet that most people will want at least one humanoid robot doing their bidding. The caveats are affordability, ease of use, and genuine capability – I have a Roomba mop gathering dust because it’s a chore to set up and maintain and it only does an OK job.
Amazing abundance
Tesla’s original mission was to accelerate the world’s transition to sustainable energy. In Master Plan Part IV, this has been updated to “accelerating the world’s transition to sustainable abundance“. Tesla envisions a world without resource constraints or scarcity, enabled by clean energy, mass-produced affordable autonomous vehicles and humanoid robots.
Tesla is moving beyond electrification toward energy, AI and robotics. This expanded vision is undeniably exciting and increasingly reflected in the company’s valuation. The ten-trillion-dollar question is whether Elon Musk and team can fully execute on it.
Elon Musk, the would-be trillionaire
Elon Musk is the face of Tesla. In 2020, he was a relatively harmless memelord on Twitter. Today, he is a deeply divisive figure, using X to meddle in politics and publicly endorse questionable characters. Hail him or hate him, he remains a visionary with the ability to corral capital, talent, and attention to turn audacious ideas into reality. Many Tesla shareholders recognise this and believe the company needs him as CEO for as long as possible.
In November 2025, Tesla shareholders overwhelmingly approved an equity compensation package that could make Musk a trillionaire. Achieving this outcome requires Tesla to clear a demanding set of operational and financial milestones over the next decade, including reaching a market capitalisation of US$8.5 trillion (a potential 6x return from current valuation).
I don’t think Elon Musk is motivated by moolah. He is a gamer at heart – the pay package is a series of escalating boss levels designed for Elon to complete for pure satisfaction.
Asymmetric bet
Tesla is no longer just an EV company and is certainly not valued as one. The company’s premium valuation increasingly rests on products and capabilities that have yet to materialise. Market reactions, such as the share price surge following a single sighting of a Model Y driving without human supervision, highlight the speculative element in the company.
At its core, Tesla is an asymmetric bet on clean energy and autonomous robots – and the exciting future they will usher in. Whatever the outcome, the only way to enjoy the ride is to have skin in the game.
The bottom line: Tesla’s success depends on diversifying away from the electric vehicles business. The bet/thesis is that clean energy and autonomous robots will drive revenue growth in the next decade.
Disclaimer and disclosure: This is my personal view as a long-time Tesla fan. It is NOT investment advice/recommendation. I write on this blog in my personal capacity; my opinions are NOT endorsed by my employer or the actuarial profession. I am financially and emotionally invested in Tesla’s success.