Transition phase: A Tesla Cybercab is seen in Austin, Texas. Cybercabs will be added to Tesla’s robotaxi service that currently relies on Model Y vehicles running a version of FSD and will also be available for consumers to buy. — AP
SAN FRANCISCO: Tesla says it will invest US$2bil in chief executive officer (CEO) Elon Musk’s artificial intelligence (AI) company xAI – and that production plans for its Cybercab robotaxi are on track for this year.
The news supported Musk’s plan to pivot Tesla from an electric vehicle (EV) maker to an AI company, which is key to the company’s roughly US$1.5 trillion valuation.
Shares rose 3.8% even though some analysts and investors were sceptical that the CEO would hit his own production launch targets, based on previous misses.
Tesla is “entering a transition phase” where it is asking investors to underwrite potential revenue from self-driving software in its cars and robotaxi business before auto sales recover, said Thomas Monteiro, senior analyst at Investing.com.
“(That) makes rollout metrics – not deliveries – the most important leading indicator from here,” Monteiro said.
Tesla’s core EV business, which still accounts for most of the company’s current revenue, has been under strain as rivals roll out newer models, often at lower prices.
A US tax incentive for EVs has also ended, and Musk’s far-right political rhetoric has alienated some customers.
Tesla’s revenue fell about 3% to roughly US$94.83bil in 2025, marking the company’s first annual decline in revenue.
To defend volumes, Tesla has relied heavily on discounts and incentives, and introduced lower-priced trims of its best sellers. Wall Street expects the company to deliver 1.77 million vehicles in 2026, representing an 8.2% increase, according to Visible Alpha data.
Adjusted earnings per share of 50 US cents in the fourth quarter topped Wall Street targets of 45 US cents, according to LSEG data. Despite the sales drop, the company’s automotive gross margin excluding regulatory credits came in at 17.9%, up from 13.6% a year earlier and well above expectations of about 14.3%, according to Visible Alpha.
Its energy generation and storage business has proven a notable bright spot, benefitting from sustained demand for grid-scale batteries used to support renewable power and stabilise electricity networks.
Revenue from the energy generation and storage segment rose 25.5% to a record US$3.84bil in the December quarter, trouncing analysts’ estimates of US$3.46bil.
“With Tesla’s legacy EV business slowing, Tesla investors can take part in the scorching hot AI boom,” said Andrew Rocco, a stock strategist at Zacks Investment Research.
Investors have also been looking for signs that Tesla’s full self-driving (FSD) and robotaxi rollouts are advancing, including updates on regulatory progress and clearer timelines for the purpose-built Cybercab, which is designed without a steering wheel or pedals.
Cybercabs will be added to its robotaxi service that currently relies on Model Y vehicles running a version of FSD and will also be available for consumers to buy.
Last week, Musk said initial production of the Cybercab robotaxi and the humanoid robot Optimus would be “agonisingly slow” before accelerating over time, leaving investors waiting for a more detailed timeline and production forecast. — Reuters
