On June 22， 2025， Tesla’s Robotaxi initiated internal testing in designated areas of Texas. The 20 Model Y vehicles used for the test were equipped with the FSD 13 system. However， in Elon Musk’s vision， the core of future Robotaxis lies in the Cybercab， devoid of steering wheels and pedals， with a target of one million such vehicles on the road by 2027.
Musk announced this development via social media in the early hours of Monday， June 23rd， leading to an 8.23% surge in Tesla’s stock price on the same day. Subsequently， however， the stock price reversed all gains over the next two trading days， indicating significant market skepticism regarding Musk’s ambitious pronouncements.
In recent years， Tesla’s core business has shown signs of weakness， with sluggish sales， delays in new model releases， and declining profits. The growth in revenue from FSD subscriptions has also been remarkably slow.
Considering the lukewarm reception of the Model 2/Q and Cybercab， coupled with the multi-year delay in the mass production of 4680 batteries， the question arises as to why investors should believe that Optimus can achieve rapid mass production and justify Tesla’s trillion-dollar valuation. The Model Y and FSD 13 systems are readily available， and their deployment in Robotaxi testing appears to be a strategic move by Musk to reawaken investor interest in the “trillion-dollar mobility market，” potentially serving as his final trump card.
Reports have emerged detailing frequent issues during the Robotaxi’s internal testing， including instances of veering into oncoming traffic， sudden braking， dropping off passengers in the middle of intersections or six-lane roads， and failing to straighten out after using the turn signal. Fortunately， safety personnel in the passenger seats intervened promptly， preventing any accidents.
While optimistically speaking， the prospect of a “trillion-dollar mobility market” via Robotaxi might seem appealing in the long term， it does little to address immediate concerns. Pessimistically， it suggests that Musk may have exhausted his viable options.
The root cause of Tesla’s decelerating sales lies in its declining innovation capabilities.
Tesla’s delivery growth trajectory has transitioned from rapid expansion to stagnation:
- In 2017， Tesla’s deliveries surpassed 100，000 units for the first time， with year-over-year growth of 36%.
- In 2018， deliveries reached 246，000 units， a year-over-year increase of 138%.
- From 2019 to 2023， growth rates continued to decline but remained in double digits. In 2023， deliveries stood at 1.81 million units， a year-over-year increase of 37.7%.
- In 2024， deliveries were 1.79 million units， a year-over-year decline of 1.1%. Quarterly sales in Q1 and Q2 saw decreases of 8.5% and 4.8%， respectively.
- In the first quarter of 2025， Tesla delivered approximately 337，000 units， a year-over-year decrease of 13%.
In April 2025， Tesla experienced a global market retreat， with sales decreasing by 6% in China， 46% in Germany， and 62% in the UK.
The reasons for Tesla’s faltering delivery growth are evident:
- Firstly， the core models， Model 3 and Model Y， have not been updated in a timely manner， leading to consumer fatigue with their aesthetics. The Model 3， launched in 2016， only received a facelift (not a full generation change) in 2023. The Model Y， released in 2019， saw its first facelift (not a generation change) only in January 2025.
- Secondly， Tesla has been slow to introduce more affordable models with potentially larger market appeal. In September 2020， Musk stated that a lower-positioned vehicle (15% smaller than the Model 3/Y) would be released within three years， but its launch has been repeatedly postponed.
Tesla’s innovative capacity has significantly diminished. With difficulties even in updating its flagship models， the prospects for its humanoid robot are questionable.
In February and March of 2025， multiple sources reported that the Model Q would be officially launched on June 25th. This suggests Tesla’s intention to boost sales with an SUV positioned below the Model Y. Contrasting this， on May 22， 2025， Xiaomi unveiled its SU7， a direct competitor to the Model Y. On June 23rd， Musk’s announcement of Robotaxi internal testing captured market attention， overshadowing any potential impact of the Model Q. On June 26th， Xiaomi announced the pricing for the SU7， ranging from 253，500 RMB (standard version) to 329，900 RMB (Max version). Xiaomi reported over 200，000 firm orders within three minutes of pre-orders opening. As Tesla’s Model Q remains elusive and the Model Y faces increased competition， particularly in the Chinese market， its period of unchallenged dominance appears to be over.
Profitability is being outmatched.
1) Vehicle Sales Gross Profit Margin Drops Below 10%!
In 2017， prior to the large-scale delivery of the Model 3， Tesla’s average vehicle price and cost per unit were as high as $82，000 and $65，000， respectively. As Model 3 and Model Y production scaled up， Tesla’s average vehicle price decreased， while its gross profit margin steadily increased， demonstrating the benefits of scale.
By 2021， deliveries had grown ninefold compared to 2017. Despite the average vehicle price falling to $47，000， the gross profit margin climbed to 25.9%. In 2023 and 2024， due to stagnating sales and the impact of price wars， the gross profit margin successively fell below the critical thresholds of 20% and 15%.
In Q1 2025， vehicle sales revenue was $12.93 billion， with costs at $11.46 billion， resulting in a gross profit of only $1.46 billion， a gross profit margin of 11.3%. However， the actual situation is more dire. Tesla includes FSD (Full Self-Driving) subscription fees as “deferred revenue” within its vehicle sales reporting. For instance， in Q1 2025， the “vehicle sales” revenue included $258 million from FSD.
If FSD revenue is excluded， Tesla’s gross profit margin on vehicle sales in 2024 and Q1 2025 was only 13.22% and 9.5%， respectively!
In 2022， BYD Auto’s sales gross profit margin was 20.4%， 5.8 percentage points lower than Tesla’s. In 2024， BYD Auto’s sales gross profit margin reached 22.3%， surpassing Tesla by 9.1 percentage points.
The following charts， based on data from Tesla and BYD， calculate the price index， cost index， and profit index per vehicle， clearly illustrating the divergent profit trends of the two companies. The year 2022 is used as a baseline because BYD ceased production of internal combustion engine vehicles in March of that year， making pre-2022 data less relevant.
Tesla
- In 2022， Tesla’s average sales price per vehicle was $51，200， the cost per vehicle was $37，800， and the gross profit per vehicle was $13，400.
- In 2024， Tesla’s average sales price per vehicle was $40，500， with a price index of 79.1， indicating a 20.8% reduction in selling price. However， the cost index reached 91.6， signifying only a 9.4% decrease in costs. With a more significant price reduction and a smaller cost reduction， the gross profit per vehicle in 2024 was $5，930， with a gross profit index of 44.2.
- Compared to 2022， the selling price in 2024 has decreased by $10，600， while costs have only decreased by $3，200. In just two years， Tesla has lost $7，470 in gross profit per vehicle sold， equivalent to approximately 53，000 RMB.
BYD
- In 2022， BYD’s average sales price was 182，000 RMB， the cost per vehicle was 145，000 RMB， and the gross profit per vehicle was 37，000 RMB.
- In 2024， BYD’s average sales price was 145，000 RMB， with a price index of 79.6， a 20.4% reduction that closely mirrors Tesla’s. The cost index was 77.7， representing a 22.3% decrease. The gross profit per vehicle was 32，000 RMB， with a gross profit index of 87.1.
- Compared to 2022， BYD’s average sales price in 2024 decreased by 37，000 RMB， costs decreased by 32，000 RMB， and gross profit reduced by 5，000 RMB. Due to a larger decrease in the denominator (BYD’s sales price)， the gross profit margin actually increased to 22.3%.
- In 2024， Tesla’s deliveries increased by only 36.2% compared to 2022， yet its gross profit per vehicle plummeted by 56% (gross profit index of 44). Consequently， the total gross profit from vehicle sales decreased by nearly 40%， dropping from $17.6 billion in 2022 to $10.6 billion in 2024 (approximately 75.6 billion RMB).
- In 2024， BYD’s deliveries surged by 139% compared to 2022， while its gross profit per vehicle decreased by 12.9%. Ultimately， the total gross profit from vehicle sales increased by 108%， rising from 66.2 billion RMB in 2022 to 137.7 billion RMB in 2024.
- In 2022， Tesla’s gross profit from vehicle sales was 1.8 times that of BYD. By 2024， it was only 55% of BYD’s， a stark reversal from market leadership to being outcompeted within a mere two years.
2) Becoming a “Carbon Credit Seller” Once More
In 2020， Tesla achieved profitability for the first time， reporting a net profit of $860 million. However， revenue from selling carbon credits in the same year amounted to $1.58 billion， equivalent to 183% of its net profit. This turnaround was largely driven by carbon credit sales， making the “carbon credit seller” moniker fitting.
From 2021 to 2023， Tesla’s profitability was exceptional. While revenue from carbon credits saw a slight increase， its proportion of net profit steadily declined， reaching 12% in 2023.
In 2024， net profit decreased by 51.7%， while the proportion of revenue from carbon credits rose to 38.6%.
In Q1 2025， net profit was $420 million， and revenue from carbon credits was $595 million， amounting to 141.7% of net profit. Tesla has once again become a “carbon credit seller.”
With a potential change in U.S. energy policy under a second Trump administration， Tesla’s “carbon credit business” faces uncertainties.
The market potential for FSD is not as significant as perceived.
If Tesla’s followers are stratified， those focused on sales have already departed， while those concerned with profitability are wavering. The core group comprises individuals who are less sensitive to sales and profit figures， holding a firm belief that “Tesla’s future revenue will come from intelligent driving.”
As previously mentioned， upon securing FSD subscription revenue， Tesla initially records it as “deferred revenue” on its balance sheet， classifying it as a current liability.
- In 2021， Tesla delivered 936，000 vehicles. Deferred FSD revenue increased by $847 million during the period. Recognized FSD revenue was $366 million， representing 0.8% of total vehicle sales revenue and 3.1% of vehicle sales gross profit.
- In 2022， Tesla delivered 1.31 million vehicles. Deferred FSD revenue increased by $1.18 billion during the period. Recognized FSD revenue was $580 million， representing 0.9% of total vehicle sales revenue and 3.3% of vehicle sales gross profit.
- In 2023， Tesla delivered 1.81 million vehicles. Deferred FSD revenue increased by $1.2 billion during the period. Recognized FSD revenue was $600 million， representing 0.8% of total vehicle sales revenue and 4.4% of vehicle sales gross profit.
- In June 2024， Tesla announced a price reduction for FSD in the US market， from $12，000 to $8，000. Prior to this， the monthly subscription price had already been lowered from $199 to $99.
- Following the significant price cuts， total annual intelligent driving subscriptions increased by $1.34 billion. Recognized FSD revenue was $1.19 billion， representing 1.6% of total vehicle sales revenue and 11.2% of vehicle sales gross profit.
Since subscription revenue has already been received， it is recognized as revenue from “deferred revenue” on a quarterly basis according to regulations. Therefore， the company’s forecasts for FSD revenue within the next 12 months are typically accurate.
FSD users are converted from Tesla’s existing customer base. The larger the ownership base， the greater the subscription volume， and thus the more revenue can be recognized from “deferred revenue” in the future.
Excluding vehicles sold before 2023， we analyze from Q1 2023:
- Q1 2023: Quarterly deliveries were 423，000 units. FSD revenue for the next 12 months was projected to be $679 million.
- Full year 2023: Total deliveries were 1.81 million units. FSD revenue for the next 12 months was projected to be $926 million.
- Q1 2024: Quarterly deliveries were 387，000 units. Combined with 2023 sales， cumulative deliveries over five quarters reached nearly 2.2 million units. However， the projected FSD revenue for the next 12 months decreased to $848 million.
- Q1 2025: Quarterly deliveries were 337，000 units. Combined with 2023 and 2024 sales， cumulative deliveries over nine quarters reached 3.93 million units. The projected FSD revenue for the next 12 months further declined to $780 million.
In 2024， Tesla recognized less than $1.2 billion in FSD revenue. With research and development expenses of $4.54 billion， assuming 30% is allocated to intelligent driving， the FSD revenue fails to even cover R&D costs.
The projected recognized FSD revenue for 2025 is a mere $840 million. Even with maximum possible recognition within regulatory allowances， FSD revenue is unlikely to exceed that of 2024.
With a substantial ownership base of 4 million vehicles， struggling to generate $1 billion in FSD revenue， and failing to recoup R&D expenses， the substantial portion of Tesla’s trillion-dollar valuation attributed to FSD appears to be highly speculative and inflated.
*The above analysis is for reference only and does not constitute any investment advice.
