Where Will Tesla Be in 10 Years?

Key Points

• The best outcome for investors is that Tesla achieves monster success with its robo-taxi and robotics ambitions.

• Tesla's current state is troubling, with sales and earnings declining in the latest quarter.

• With shares trading at a nosebleed price-to-earnings ratio of 265, prospective investors have zero margin of safety.

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Tesla (NASDAQ: TSLA) is a polarizing company, to say the least. On the one hand, there are strong supporters who are convinced that founder and Chief Executive Officer Elon Musk will one day usher in a new world of self-driving cars and robotics. On the other hand, the bears will point to deteriorating financials that reveal a struggling automaker.

Whichever way you view the business, no one can deny that Tesla has worked out to be a wonderful investment. The electric vehicle (EV) stock has soared 2,580% during the past decade (as of Sept. 29), trouncing the overall market by a wide margin. But perhaps the market is getting too excited, as the business sports a market cap of $1.5 trillion.

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Long-term investors have a lot to think about. Where will Tesla be in 10 years?

Smooth journey to unrivaled success

Making accurate predictions is extremely difficult to begin with. But trying to figure out what a business, one that operates in quickly evolving markets, will look like a decade from now seems impossible. Despite this challenge, the most optimistic outcome for Tesla is very clear.

Musk is pressing the gas pedal hard in two key areas: full self-driving (FSD) and robotics. The business is making progress with FSD capabilities, although it's years behind Musk's timetable. Tesla finally launched its robo-taxi service in Austin, Texas, in June. Including Texas and California, it will soon test them in Nevada and Arizona.

"Assuming we have regulatory approvals, it's probably addressing half the population of the U.S. by the end of the year," Musk said about the robo-taxi service on the Q2 2025 earnings call.

The ultimate goal is to have a ride-hailing platform, similar to Uber or Lyft, operating around the globe. The difference would be that Tesla controls the manufacturing of the EVs, with the cars also being completely autonomous. Costs for riders would drop significantly, boosting demand. This would theoretically be a financial boon for Tesla.

Additionally, Tesla's humanoid robot Optimus could be in homes and factories around the world by 2035. Tesla still needs to scale up manufacturing. Musk wants to produce 1 million units annually within five years. He thinks the use cases are unlimited, with a view that robotics could bring in $10 trillion in revenue.

If Tesla makes good on FSD and robotics promises, and there proves to be tremendous demand, then it's anyone's guess what the business looks like 10 years from now. Assuming flawless execution, coupled with external factors working in Tesla's favor, the company's market cap could be multiples of the current value. And shareholders would be beyond pleased.

Recent financial performance

It might be difficult for investors to envision the most optimistic 2035 version of Tesla. That's because at this point, this is a troubled car company. Automotive revenue declined 16% in Q2, while operating income fell 42%. Competition is partly having an impact.

However, recent financials have shown that the business is not immune to economic forces. This is the biggest risk of investing in car companies, as consumer demand changes with the macro winds, particularly interest rates.

Somewhere in the middle

Getting the robo-taxi service off the ground, while working to expand manufacturing capacity for robots, is certainly progress. However, Tesla has a long way to go to fulfill Musk's vision. It's not a sure thing that the business will dominate in these areas a decade from now. So, if the just-mentioned pessimistic view is the reality, then Tesla shareholders are in for a disappointing decade.

The valuation points to a decent likelihood that the business will find outsized success with its two key projects, FSD tech and robotics. But nothing is guaranteed. And the shares trade at a stratospheric forward price-to-earnings ratio of about 265.

Perhaps the Tesla of 2035 will be somewhere in the middle of these two extremes. Either way, the stock provides no margin of safety right now.

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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla and Uber Technologies. The Motley Fool recommends Lyft. The Motley Fool has a disclosure policy.