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Tesla's (TSLA -7%) highly-anticipated robotaxi unveiling last night has proven to be a letdown today as a sell-the-news reaction brings shares down to one-month lows. The EV manufacturer unveiled a driverless, fully autonomous vehicle dubbed the Cybercab during its event, featuring no steering wheel or pedals since no human would be operating the vehicle. The design language mirrored the Tesla Cybertruck, hence the similar name. CEO Elon Musk estimated that the Cybercabs would cost below $30,000 and be available before 2027, shooting for sometime in 2026.

TSLA has discussed eventually producing a robotaxi for years, providing updates during quarterly conference calls on the status of its robotaxi platform design and full self-driving (FSD) improvements. A planned unveiling was announced earlier this year, finally putting years of rumors and speculation on stage in the form of a tangible product. However, the end result did not live up to the hype.

• Largely squashing excitement was TSLA's roadmap for bringing the Cybercab to market. The company does not foresee the vehicle hitting the streets for two more years despite the years spent hinting about a robotaxi and the constant improvements made surrounding FSD. For instance, in July, Mr. Musk noted that its customers will experience a step change improvement in how well-supervised FSD works with its updated 12.5 version rolling out. Combining this with TSLA's history of delayed launches, e.g., the Cybertruck, is dampening the mood today.
• Plenty of capital has already been spent on scaling FSD and other AI-related initiatives. TSLA projected over $10.0 bln in CapEx this year as it increases its spending on bringing its 50K GPU cluster online. Further capital will be required during the development of the Cybercab, possibly squeezing near-term profitability at a time when economic challenges refuse to budge.
• Competition is also not sitting idle. OEMs, from General Motors (GM) to Ford Motor (F), have self-driving features embedded in their premium vehicles. In fact, Uber (UBER) announced in August that it partnered with GM's Cruise self-driving unit to bring the technology to its platform. Meanwhile, tech firms, such as Google's (GOOG) Waymo, have been testing driverless vehicles for years.
  • TSLA has downplayed the competition in the past, noting that rivals' technology is highly localized, requiring high-density mapping, making it fragile. Also, OEMS have expressed interest in licensing TSLA's FSD technology, showcasing its competitive edge.

Bottom line, competitive and economic headwinds already led to TSLA's fourth straight earnings miss in Q2, dragged down by a 180 bp contraction in automotive gross margins to almost half of what they were just two years earlier. The company's strategy has been volume over margins, relying on future success from new models, FSD, and, of course, the Cybercab, to charge growth. TSLA's long-term success hinges greatly on the production of the Cybercab having only minor setbacks. By providing a 2026 timeline, investors are worried about the amount of time between now and then for plenty to go wrong.