Electric vehicle giant Tesla TSLA shares climbed over 5% on Monday, reaching $338.74, following a Bloomberg report indicating that President-elect Donald Trump’s transition team is prioritizing a federal framework for autonomous vehicle (AV) regulations. Talks are rife that Donald Trump will ease regulations for self-driving cars during his upcoming second presidential term.
Impact of Likely Federal Deregulation on Tesla
RBC Capital analyst Tom Narayan emphasized the potential benefits of federal deregulation for Tesla, which derives 33% of its valuation from the AV business, as quoted on electric-vehicles.com. "Federal deregulation on autonomous vehicles would be a positive for Tesla shares. Robotaxis account for 44% of our valuation," Narayan wrote in a research note.
He added that federal policies could also support Tesla’s efforts to achieve Level 4 autonomy for its Full Self-Driving (FSD) system, representing an additional 33% of Tesla’s valuation. Narayan foresees AVs transforming into multi-purpose living, working, and sleeping spaces, with Tesla developing purpose-built vehicles for these uses.
Challenges for Tesla’s Camera-Based FSD System
Despite optimism about deregulation, Narayan acknowledged hurdles for Tesla's FSD system. Current data shows Tesla tracking at 10,000 miles before requiring human intervention, compared to Waymo's 17,000 miles. In states like California, obtaining robotaxi licenses may require lidar systems — a technology Tesla's camera-based system avoids. Narayan questioned whether federal policies would supersede such state-level requirements.
Cybercab Production Goals and Features
Tesla is targeting volume production of its Cybercab by 2026, aiming for an output of 2 million units annually without extended ramp-ups. CEO Elon Musk expressed confidence in reaching this milestone during the last earnings call. Tesla also plans to debut its Cybercab in ride-hailing services in Texas and California as early as next year.
Impact on Uber, Lyft Shares on Talks of Easing Self-Driving Rules
Uber UBER stock and shares of rival Lyft LYFT fell 5.4% and 4.5%, respectively, on Monday following a report that Donald Trump will ease regulations for self-driving cars during his upcoming second presidential term. Tesla's plan for a robotaxi network could challenge Uber's command of the ride-hailing market.
However, Uber is also actively advancing in the robotaxi space, leveraging its app as a platform for autonomous vehicle developers to connect with potential users. The ride-hailing giant has forged partnerships with leading companies like Google’s GOOGL Waymo, General Motors’ GM Cruise, and Avride, among others, to integrate autonomous vehicles into the Uber app.
Meanwhile, earlier this month, Lyft announced partnerships with technology innovators like Mobileye MBLY to accelerate its AV initiatives. However, Tesla seems to have an edge on the matter as Tesla owners will be able to list their vehicles on a Tesla-operated ride-hailing app, utilizing the company’s Full Self-Driving technology.
ETFs in Focus
Tesla-heavy ETF Consumer Discretionary Select Sector SPDR Fund XLY advanced about 1% on Nov. 18, while another ETF ARK Autonomous Technology & Robotics ETF ARKQ jumped 1.6% on the day. Uber-heavy fund iShares US Transportation ETF IYT fell 1.1% on Nov. 18.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.
Get it free >>General Motors Company (GM) : Free Stock Analysis Report
Tesla, Inc. (TSLA) : Free Stock Analysis Report
iShares U.S. Transportation ETF (IYT): ETF Research Reports
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
Mobileye Global Inc. (MBLY) : Free Stock Analysis Report
Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports
ARK Autonomous Technology & Robotics ETF (ARKQ): ETF Research Reports
Lyft, Inc. (LYFT) : Free Stock Analysis Report
Uber Technologies, Inc. (UBER) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
