Cathie Wood, the visionary head of Ark Investment Management, has a bold prediction about Tesla's future. Contrary to the belief that the company's success hinges on its passenger electric vehicle (EV) business, Wood believes Tesla's true potential lies in its autonomous driving technology and robotaxi services. This unconventional perspective challenges the conventional wisdom and offers a glimpse into the transformative power of innovation.

Unlocking Tesla's Autonomous Potential

Passenger EVs: A Shrinking Piece of the Pie

Tesla's passenger EV business, which currently accounts for around 79% of its revenue, is facing a significant shift. Ark's financial models suggest that by 2029, a mere 14% of Tesla's earnings will come from this segment. This dramatic change is driven by the company's relentless focus on developing its full self-driving (FSD) software and the Cybercab, a revolutionary self-driving robotaxi.

The Rise of FSD and Cybercab

Elon Musk, Tesla's CEO, has made it clear that the company's future is in autonomous vehicles, not traditional passenger EVs. The unveiling of the Cybercab, a self-driving robotaxi without a steering wheel or pedals, is a testament to this vision. Powered by Tesla's FSD software, the Cybercab is poised to revolutionize the transportation industry, offering a safer and more efficient alternative to human-driven vehicles.

Unlocking Unprecedented Profitability

Ark's financial models suggest that FSD and the Cybercab could account for a staggering 86% of Tesla's projected $440 billion in earnings before interest, tax, depreciation, and amortization (EBITDA) by 2029. This is due to the high-profit margins associated with software and autonomous services, which can far exceed the current 19.8% gross margin across Tesla's hardware businesses.

Scaling Up for the Future

Achieving Ark's ambitious 2029 forecast will require Tesla to grow its revenue twelvefold, a compound annual growth rate of 64.7% over the next five years. This rapid expansion will hinge on the successful scaling of FSD and the Cybercab, as passenger EV sales alone are unlikely to drive such exponential growth.

Navigating the Challenges

Tesla's journey to autonomous dominance is not without its challenges. The Cybercab is not yet approved for unsupervised use in the U.S., and the company must overcome regulatory hurdles to unlock its full potential. Additionally, Tesla's current stock valuation, with a price-to-earnings ratio more than double the Nasdaq-100 technology index, reflects the high expectations placed on the company's future success.

Investing in Tesla's Autonomous Future

For investors, the decision to invest in Tesla hinges on their confidence in the company's ability to execute on its ambitious autonomous vision. While Ark's forecast may be optimistic, the potential rewards of Tesla's autonomous revolution are undeniable. As the company navigates the road ahead, investors must weigh the risks and rewards, keeping a close eye on the progress of FSD and the Cybercab.