TeslaTesla (NASDAQ:TSLA) has been one to watch in the electric vehicle (EV) market for years, but its latest announcement has caught my attention as an investor. The EV giant plans to launch its Full Self-Driving (FSD) software in Europe and China during the first quarter of 2025, pending regulatory approval. This expansion could be a game-changer for Tesla’s global market presence and, potentially, its stock price.
A volatile year
With a market cap of $673.2 billion, the stock is down 23% over the past year, which might give some investors pause. However, looking at the bigger picture, the company's five-year return stands at an impressive 1,189%, demonstrating long-term growth potential.
Management’s plan to bring the FSD system to Europe and China is an important step. Recent regulatory changes in Europe have paved the way for the company to introduce its most advanced features without making major modifications to driver control systems. These markets represent great opportunities for the company to expand its advanced driver assistance technology and collect more data to train ai models.
The announcement sent shares up more than 7%. This reaction suggests that investors are anticipating additional FSD-driven revenues in these new markets, after a long period of uncertainty over whether the technology would be compatible with stricter regulatory bodies.
What’s next? The company’s innovative approach extends beyond the front parking feature. The company announced plans to add parking, unparking, and reversing features, further enhancing its capabilities. These continued improvements could help the company maintain its competitive edge as competitors continue to move ahead.
Much risk
While the expansion plans are exciting, it's important to approach this news with a balanced perspective. CEO Elon Musk's timelines have been known to be optimistic in the past, and regulatory approval is never guaranteed. The actual launch date could be later in 2025 or later, depending on a number of factors.
Furthermore, the FSD system has come under criticism and scrutiny in its home market, the United States. Some users have reported that the system, while capable of driving the car, does not always do so safely or smoothly. This could easily lead to difficulties in gaining regulatory approval and consumer trust in new markets.
From a financial standpoint, the current price-to-earnings (P/E) ratio of 54.3 times suggests that the stock is priced in line with high growth expectations. A discounted cash flow (DCF) calculation also suggests that the stock is overvalued by 43% at present. If the company fails to meet these expectations, it could suffer a steep decline.
Of course, plans to expand FSD into Europe and China represent a significant growth opportunity. The company's strong brand presence and technological leadership in electric vehicles could give it a significant advantage when entering new markets.
I'm paying attention
In my opinion, Tesla's ambitious plans for FSD expansion make the stock price worth keeping a close eye on. The potential for increased revenue and market share in Europe and China could be a major catalyst for future growth. So while the timeline for launch and abundant risks make this a company prone to some bumps along the way, I think this will be a significant moment for the future of the technology.
With more data, systems can continually improve and unlock even more potential. I will hold my shares and keep an eye on the price for new opportunities.
