Tesla’s share price is once more approaching its peak levels, but the narrative driving this momentum has fundamentally shifted. The focus is no longer solely on electric vehicle production but has pivoted to the company’s ambitious autonomous driving future. This comes amid a critical juncture featuring a key advancement in its robotaxi program, mounting criticism over board compensation, and emerging regulatory challenges from Europe. The core question for investors is whether to value Tesla as a conventional automaker or as a high-risk technology story betting on a self-driving revolution.
Regulatory Headwinds and a Lucrative Revenue Stream Under Threat
New potential challenges are emerging from European regulators. According to insider reports, the European Commission is considering softening its strict mandate for a complete combustion engine ban by 2035. The proposed change could allow up to 10% of new vehicles sold to be non-electric. This initiative is largely a result of intense lobbying from traditional European car manufacturers, who face significant competitive pressure from Tesla and Chinese rivals like BYD.
This development presents a dual problem for Tesla. First, relaxed rules would benefit legacy automakers with extensive hybrid vehicle portfolios. Second, and more financially impactful, it could reduce demand for emissions credits from those same European carmakers. Tesla has generated substantial annual revenue—ranging from several hundred million to as much as $1 billion—from selling these regulatory credits in Europe. A dilution of the rules threatens this lucrative ancillary income stream while granting competitors more breathing room to sell transitional models for longer.
Board Compensation Draws Intense Scrutiny
Parallel to its technological ambitions, Tesla’s corporate governance is facing heightened examination. A Reuters investigation into the compensation of the company’s board of directors has revealed that since 2004, directors have received over $3 billion in stock-based awards—a sum significantly exceeding payouts at other major technology firms.
The analysis highlights several extreme examples:
* Kimbal Musk, the CEO’s brother, has accrued nearly $1 billion since 2004.
* Director Ira Ehrenpreis has received approximately $869 million since 2007.
* Board Chair Robyn Denholm has accumulated around $650 million since 2014.
Between 2018 and 2024, the average annual compensation for a Tesla director was $1.7 million. This figure is more than two-and-a-half times the average for directors at Meta, which typically leads compensation comparisons among the “Magnificent Seven” tech stocks. Notably, Tesla’s board is predominantly compensated with stock options rather than direct stock grants, a model used by only about 5% of the top 200 U.S. companies. This unusual structure fuels debates about potential conflicts of interest and governance quality at a firm valued by the market as a technology giant.
Driverless Testing Marks a Pivotal Step
The immediate catalyst for the recent stock movement is CEO Elon Musk’s confirmation that Tesla has begun testing its robotaxis without human safety monitors inside the vehicles. Since June, a limited robotaxi service using retrofitted Model Y vehicles equipped with Full Self-Driving software has been operating in Austin, Texas. Until now, a human “safety monitor” was always present in the passenger seat.
This move to completely driverless testing fulfills management’s third-quarter promise to eliminate safety drivers within months. According to Morningstar analyst Seth Goldstein, this development aligns with expectations; the firm maintains its fair value estimate of $300 per share and views the stock at current levels as overvalued.
Should investors sell immediately? Or is it worth buying Tesla?
The roadmap for the autonomous program includes several key milestones:
* Test rides are now sometimes conducted with no occupants in the vehicle.
* The launch of a dedicated “Cybercab” robotaxi model is planned for next year.
* A full-scale robotaxi rollout across the United States is targeted for 2028.
* Competitor Waymo is currently completing roughly 450,000 paid rides per week.
This clarifies why investors are increasingly looking past current delivery figures toward the potential platform business of robotaxis, despite the significant regulatory and technical hurdles that remain.
A Contradictory Picture in the Home Market
Tesla’s position in the United States presents a paradox. The company’s deliveries in November fell 23% year-over-year to 39,800 vehicles, marking the lowest monthly total since January 2022. Despite this decline, Tesla’s market share in the domestic EV sector actually increased.
The reason lies in a severe contraction of the overall U.S. electric vehicle market. Following the expiration of the $7,500 federal tax credit in September, total EV sales plummeted by 41%. In this shrunken market, Tesla’s share of EV sales climbed from 43% to 56%. In other words, while Tesla is selling fewer cars, its dominance over a considerably smaller market has intensified.
Wall Street’s Divided Verdict
Analyst perspectives on Wall Street remain sharply polarized. Wedbush analyst Dan Ives projects a potential market capitalization of up to $2 trillion by the end of 2026, with an extreme bullish case of $3 trillion if Tesla’s “AI chapter” fully materializes. In this view, robotaxis, AI software, and robotics projects ultimately hold greater significance than the core vehicle business.
Morningstar occupies the opposite end of the spectrum. Its analysts consider the stock to be roughly 60% above fair value, award it only 2 out of 5 stars, and describe the investment narrative as having a “very high” degree of uncertainty. Their stance is clear: without the successful monetization of autonomy and AI projects, the current valuation level cannot justify the associated risks.
The stock’s technical position offers context: shares recently closed at 404.20 euros, approximately 12% below the 52-week high but nearly double the 52-week low from April. This price action is accompanied by an overbought Relative Strength Index (RSI) reading of 73.7.
Conclusion: A Premium on Promise
The coming weeks will serve as a crucial test of whether Tesla can advance toward its autonomous future or if governance debates and political headwinds will dampen investor enthusiasm. The critical factors will be progress in driverless testing, concrete EU decisions on the combustion engine phase-out, and the board’s handling of the compensation debate. The outcome at these specific junctures will determine whether the current premium valuation is justified or merely an expensive bet on future potential.
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