Tesla in 2026: Electric Vehicles Under Pressure, AI Takes Over

Tesla is betting on artificial intelligence and autonomous driving technology to redefine the future.

This year, Tesla's stock price has increased by over 25%, surpassing the S&P 500 index's 18% gain, and reached an intraday historical high of $498.83 in December.

Despite pressure on electric vehicle sales, the market has high hopes for the company's progress in autonomous taxi services, humanoid robots, and self-developed chips. Wedbush analyst Dan Ives predicts that Tesla could reach a $3 trillion valuation after a "monster year," nearly double its current market value.

However, several targets set by Tesla CEO Elon Musk for 2025 have not been met. The company's robotaxi service operates only in Austin and the San Francisco Bay Area, with about 160 active vehicles, far below Musk's promise to deploy in at least eight metropolitan areas.

At the same time, its electric vehicle sales in the U.S. are expected to decline by 9%, with sales in the Chinese market down 9% year-on-year, and a staggering 39% drop in the EU market.

Analysts generally believe that investors have become accustomed to Musk's over-promises and will not be overly concerned as long as they can see visible progress.

Robotaxi Expansion Faces Obstacles

Tesla's robotaxi network progress is far below expectations.

Musk had promised to operate in at least eight metropolitan areas, including Phoenix and Las Vegas, by the end of the year and significantly expand the fleet size in Austin and the San Francisco Bay Area.

According to crowdsourced data tracking, currently, only about 160 vehicles are in operation, and the Austin fleet has not achieved the goal of increasing to 60 vehicles by the end of the month.

The service currently offered by Tesla in Austin and the San Francisco Bay Area is not much different from that of Uber Technologies or Lyft, using Model Y SUVs equipped with the FSD system, but still requires employee supervision.

The company is testing unsupervised trips in Austin, and Musk hopes to remove in-car safety supervisors by the end of December. CFRA analyst Garrett Nelson stated:

In the past, we have seen Musk over-promise on product or service launch timelines, and we expect the same for robotaxi.

Analysts have differing expectations for expansion in 2026. Barclays and Truist Securities warn that the pace of Tesla's expansion compared to competitors like Waymo, a subsidiary of Alphabet, is unclear, which could lead to stock price volatility.

Deutsche Bank predicts that if Tesla meets its goal of 1,500 vehicles by the beginning of the year, the fleet size could exceed 2,500 vehicles by June.

Institutions like Morgan Stanley have adopted more conservative forecasts. Tesla's Cybercab robotaxi model is also set to go into production in 2026, but it is unclear when it will operate on U.S. roads.

Morningstar analyst Seth Goldstein pointed out that one reason for the delays is Tesla's high emphasis on safety, as dangerous incidents could force it to pause testing, a problem previously encountered by General Motors' former robotaxi division He said:

I think they want to be extra cautious to ensure they are very effective when entering the market.

FSD Overseas Expansion Becomes a Key Variable

The adoption rate of Full Self-Driving (FSD) software has been low.

As of the third quarter, only 12% of Tesla customers have paid to enable FSD. However, overseas market expansion may change this situation, bringing additional revenue, training data, and potentially boosting sales.

Musk stated that Tesla "hopes" to offer FSD in the UAE in January, which will be its first market in the Middle East. He also expects that overseas regulatory agencies will fully approve FSD "around February or March," which should help Tesla compete with rivals offering similar systems.

Goldstein noted that the approval of FSD in Europe will be an "uncertain factor." Dutch regulators plan to test the system in February, which may pave the way for approval in the Netherlands. According to Tesla, if FSD is approved in the Netherlands, other EU countries will have the right to recognize that exemption.

Subsequently, the company stated it would seek formal approval from the European Commission for the software. This could help improve Tesla's sales in the 27 EU countries, where sales have declined by about 39% year-on-year in the first 11 months of this year, as the company faces increasingly fierce competition from rivals.

Tesla's U.S. sales are expected to decline by 9% in 2025, and Musk stated that the next few quarters will be "difficult." This is mainly due to the U.S. canceling previous tax credits that incentivized electric vehicle purchases, which has led some consumers to reduce their electric vehicle purchases.

However, some analysts believe this may benefit Tesla in the long run. Canaccord Genuity analyst George Gianarikas wrote in a recent report:

Only brands with strong products, cost discipline, and loyalty can maintain/gain market share. This is good for Tesla.

Robots and Chips Define Long-Term Value

Tesla is about to begin production of two products that could define its future: a humanoid robot series and a micro silicon chip.

According to Morgan Stanley, the humanoid robot market could be worth $5 trillion by 2050, with the technology accelerating in the mid-2030s.

Musk proposed selling the Optimus robot for about $30,000 for use in factories and homes, stating that this product could one day account for 80% of Tesla's value.

However, Tesla has a long way to go to achieve this goal. The company has encountered issues in designing the robot's hands and forearms and sourcing components. Musk stated in October:

Cars have ready-made supply chains, computers have ready-made supply chains. But humanoid robots do not have a supply chain.

According to Musk, the third version of the Optimus prototype for mass production is expected to be ready for demonstration before March.

Nelson and other analysts are eager to learn more about the Optimus roadmap. However, he noted that this remains a "secondary" product and is unlikely to contribute to Tesla's earnings in the near term The AI5, which will power robots, data centers, and robotaxis, is Tesla's next-generation chip that is planned to begin production by the end of 2026. Musk claims that AI5 has significant improvements over the current AI4 and outperforms Nvidia's competing chips.

Musk stated in October:

We pursue minimalism. The end result is that I believe AI5 may be the best in terms of performance per watt, perhaps two to three times better, and may be the best in terms of AI performance per dollar, perhaps ten times better.

Tesla's roadmap for 2026 also includes the production of new energy products and updates on the long-awaited next-generation sports car plan. The all-electric Tesla Semi truck is also expected to enter mass production in the second half of 2026 after years of delays.