Tesla Abandons Car Sales Focus for Robotaxi Gamble

The Numbers Behind the Strategic Shift

Tesla's third-quarter 2025 financial results paint a picture of a company in transition. Revenue reached $28.1 billion, representing a 12% year-over-year increase and breaking two consecutive quarters of decline. The company delivered a record 497,099 vehicles during the quarter, surpassing analyst expectations of around 439,800 units.

However, beneath these seemingly positive figures lies a more complex reality. Operating profit plummeted 40% year-over-year to $1.624 billion, while adjusted earnings per share came in at $0.50—missing the Street's expected $0.54. The company's automotive margins continue to face pressure, partly due to the expiration of the US federal electric vehicle tax credit on September 30, the last day of the quarter.

Perhaps most telling for European observers: Tesla's vehicle registrations across the continent have plunged 37% since the start of 2025. This decline stems from multiple factors, including consumer backlash against Musk's political activism and intensifying competition from established manufacturers like Volkswagen and Chinese rivals such as BYD.

From Car Sales to AI Services

During the earnings call, Musk articulated a vision that fundamentally challenges traditional automotive business models. Rather than focusing on meeting immediate customer orders, Tesla is expanding production capacity with a different goal in mind: building a fleet of vehicles capable of operating as fully autonomous taxis once regulatory approval is secured.

"We're at a critical inflection point for Tesla and our strategy going forward as we bring AI into the real world," Musk stated. "We're really just at the beginning of scaling quite massively Full Self-Driving and robotaxi and fundamentally changing the nature of transport."

Central to this strategy is Musk's concept of Tesla vehicles as "appreciating assets". Unlike conventional cars that depreciate the moment they leave the dealership, Musk argues that Teslas equipped with Full Self-Driving (FSD) hardware will increase in value over time. The theory: once full autonomy receives regulatory approval, owners could activate a robotaxi mode through the mobile app, allowing their vehicles to earn money while sitting idle.

It's an audacious claim that transforms every Tesla sold today into what Musk calls a "sleeping robot"—a dormant asset awaiting activation.

Current Robotaxi Operations and Expansion Plans

Tesla has already launched limited robotaxi services in Austin, Texas, and parts of the San Francisco Bay Area. However, unlike competitor Waymo's fully driverless operations, Tesla's current robotaxis still require safety drivers in the passenger seat—a significant distinction that underscores the technology's current limitations.

Musk announced ambitious expansion plans during the earnings call, stating that Tesla expects to remove safety drivers from large parts of Austin by the end of 2025 and expand operations to 8 to 10 metropolitan areas by year's end. The company also opened a US and Canada waitlist for its robotaxi iOS application.

Yet the numbers reveal a sobering reality: only 12% of Tesla's current fleet uses FSD Supervised, the company's partially automated system. This low adoption rate raises questions about customer confidence in the technology—confidence that will be crucial for the robotaxi business model to succeed.

The European Regulatory Challenge

For European readers, the timeline for Tesla's autonomous ambitions appears significantly longer than in the United States. While Tesla has applied for regulatory approval to deploy FSD in Europe, the continent's stringent safety requirements and fragmented regulatory landscape present formidable obstacles.

The United Nations Economic Commission for Europe (UNECE) has established strict protocols for autonomous vehicles, requiring alignment across 54 member states with varying traffic laws, speed limits, and road conditions. A key milestone arrived in September 2025 when UNECE regulation amendments enabling system-initiated maneuvers on highways came into force—allowing vehicles to change lanes autonomously while drivers maintain supervision.

However, this represents only partial progress. The regulation applies solely to highways, not city streets where the majority of robotaxi operations would occur. Full urban autonomy in Europe is unlikely before 2028, according to industry analysts familiar with the regulatory process.

Tesla's European rollout has been further complicated by public skepticism. A 2024 Eurobarometer survey found that 62% of EU citizens distrust fully autonomous vehicles, citing safety concerns and potential job losses in the transportation sector. High-profile incidents involving autonomous vehicles in the United States have only amplified these concerns across the Atlantic.

Waymo's Substantial Lead

While Tesla discusses future plans, Alphabet's Waymo subsidiary has already established a commanding presence in the robotaxi market. The company currently provides more than 250,000 paid rides per week across five US cities: Phoenix, San Francisco, Los Angeles, Austin, and Atlanta—all with fully driverless vehicles.

Waymo's approach differs fundamentally from Tesla's. Rather than relying solely on cameras and AI like Tesla's FSD system, Waymo vehicles employ a multi-sensor suite including lidar and radar. This hardware costs approximately $100,000 per vehicle, compared to Tesla's estimated $2,000 per vehicle for FSD hardware—a crucial difference in potential scalability.

The company has also announced plans to expand internationally, with London operations expected to begin in 2026, marking Waymo's first European market entry. Testing in Tokyo began in April 2025, demonstrating Waymo's global ambitions.

In China, Baidu's Apollo Go service represents Waymo's primary competitor, conducting over 1.1 million rides per quarter—roughly half of Waymo's volume but growing rapidly in a market where Tesla faces its own challenges with FSD approval.

The Safety Question

Safety data has become a critical battleground in the autonomous vehicle debate. Waymo has published peer-reviewed research showing its vehicles involved in 85% fewer crashes with serious injuries than average human drivers over 56.7 million miles. The company has maintained transparency by publishing detailed safety reports and working with independent organizations like the Insurance Institute for Highway Safety.

Tesla reports fewer crashes per million miles (0.15) compared to Waymo's 1.16, though critics note that Waymo operates in geofenced areas with more complex urban environments, potentially increasing risk exposure. Tesla's FSD Supervised system has accumulated over 6 billion miles of real-world driving data, a substantial dataset for training its neural networks.

However, concerns persist. The US National Highway Traffic Safety Administration maintains an ongoing investigation into approximately 3 million FSD-equipped Teslas over traffic signal violations. In October 2025, Tesla also issued a recall for about 13,000 vehicles due to a battery-pack contactor defect.

Financial Implications and Market Reaction

Tesla's strategic pivot requires substantial capital investment at a time when automotive margins face pressure. Chief Financial Officer Vaibhav Taneja indicated that capital expenditures will "increase substantially in 2026" to fund AI and robotics expansion, including the development of the Cybercab—a purpose-built robotaxi with no steering wheel or pedals scheduled for production in Q2 2026.

The company's energy storage division has emerged as a bright spot, with revenue jumping 44% to $3.42 billion in Q3—becoming Tesla's biggest growth engine. This diversification provides some cushion as the core automotive business transforms.

Financial markets have responded with characteristic volatility to Tesla's ambitious plans. The stock declined approximately 3-5% in after-hours trading following the earnings announcement, as investors grappled with missed earnings expectations and limited concrete guidance on robotaxi economics. Wedbush analyst Dan Ives, a prominent Tesla bull, maintains that autonomous technology alone could add $1 trillion to Tesla's valuation over the next few years—but only if execution matches ambition.

The Stakes for Urban Mobility

If successful, Tesla's robotaxi vision could fundamentally alter urban transportation economics. The company aims to achieve an annualized production rate of 3 million vehicles within 24 months, creating a potential fleet vastly larger than Waymo's current operations. Musk has also teased the Optimus humanoid robot as "the biggest product of all time," claiming it leverages the same real-world AI capabilities developed for autonomous driving.

For European cities already grappling with congestion, air quality concerns, and the transition to electric mobility, widespread robotaxi adoption could offer solutions—or introduce new challenges around job displacement, data privacy, and urban planning.

Yet significant hurdles remain. Traditional automakers like Volkswagen and BMW have not stood still; they're developing their own autonomous capabilities and partnering with technology companies like Mobileye. China's automotive sector, supported by government initiatives, continues advancing autonomous vehicle technology at a rapid pace.

A High-Stakes Gamble

Tesla's strategic shift represents one of the automotive industry's most audacious bets. The company is essentially wagering that it can solve technical challenges that have eluded the industry for decades—achieving reliable, safe, full autonomy—while simultaneously navigating complex regulatory frameworks across multiple continents and convincing consumers to trust the technology.

For European observers, the timeline appears particularly uncertain. While highway-level autonomous features may arrive in late 2025 or early 2026, the full robotaxi experience that Musk envisions remains years away from regulatory approval on the continent. The fundamental question persists: Has Tesla shifted strategy at the right moment, or has it abandoned a profitable automotive business for an uncertain AI future?

The answer will likely unfold over the next several years, as regulatory frameworks evolve, technology matures, and consumers decide whether they're ready to trust their daily transportation to artificial intelligence. What remains certain is that Tesla has once again chosen to challenge industry conventions, refusing to compete on traditional terms.

Whether this gamble pays off could determine not just Tesla's future, but the trajectory of autonomous transportation worldwide.