Tesla Europe Woes Continue: Worth Holding on Autonomy Promises?

Tesla TSLA is having a tough time in Europe, with sales in the continent declining for the 13^th straight month in January. The electric vehicle (EV) giant sold just over 8,000 vehicles last month, down 17% year over year. An aging lineup and intensifying competition from Chinese EV makers like BYD Co Ltd BYDDY, which offer more affordable models, weighed heavily on demand. CEO Elon Musk’s political involvement has also hit the brand image of Tesla in Europe.

The weak performance is even more concerning given that the broader European BEV market grew around 14% in January. Meanwhile, BYD, which dethroned Tesla as the world’s top EV seller in 2025, delivered more than 18,000 vehicles in the region last month.

As Tesla’s core EV business faces mounting pressure, Musk is repositioning the company as a technology player. He argues that Tesla is no longer just a carmaker, highlighting artificial intelligence (AI), autonomous driving and robotics as its next major growth drivers.

But do these long-term bets offer a compelling case to hold the stock now? Let’s see.

Tesla Lagging in the Robotaxi Space

Tesla began its first robotaxi service in Austin in June 2025. The service now operates in Austin and the California Bay Area, with plans to expand to seven more cities in the first half of the year— Dallas, Houston, Phoenix, Miami, Orlando, Tampa and Las Vegas.

Musk has said that, pending regulatory approval, fully autonomous Tesla vehicles could reach roughly a quarter to half of the U.S. population by the end of the year. It’s worth remembering that back in July 2025, he made a similar claim, suggesting autonomous ride-hailing could reach “probably” half the U.S. population by year-end—a target that ultimately slipped. Given that history, some skepticism is natural. The key question now is whether this timeline is finally realistic or just another ambitious goal. For now, it remains a wait-and-see story.

Tesla also faces formidable competition. Alphabet’s GOOGL Waymo, the current frontrunner in U.S. robotaxis, recently expanded driverless operations to additional cities, including Dallas, Houston, San Antonio and Orlando, bringing its total footprint to 10 cities.

More importantly, Waymo’s vehicles operate at Level 4 automation, meaning they can function without human intervention in designated areas. Tesla’s vehicles, by contrast, still remain at Level 2 automation, which still requires active driver supervision.

While Tesla has deployed a limited number of driverless robotaxis in Austin without human safety supervisors, it’s nowhere near Waymo’s scale.  Also, since launch, Tesla’s Austin robotaxis have reportedly been involved in 14 crashes. The company, on its latest earnings call, said that the fleet has logged nearly 700,000 paid miles. In comparison, Waymo is logging over 450,000 paid rides per week in the United States. At this stage, the technological and operational gap with Waymo is substantial, and Tesla has a lot of catching up to do.

Optimus: Big Vision, But When Do Returns Come?

Beyond robotaxis, Musk is focusing actively on Tesla’s humanoid robot, Optimus. The company plans to unveil its third-generation Optimus in the first quarter of 2026, targeting mass production.

Last year, Musk made extraordinarily bold projections, suggesting that Optimus could eventually generate more than $10 trillion in revenue over the long term. Even by Musk’s own admission, the numbers “sound absolutely insane.”

While robotics could represent a large future market, meaningful scaling is likely years away. Commercial viability, cost efficiency and real-world utility still need to be demonstrated. For now, Optimus remains more vision than financial reality.

Massive Capex Amid Core EV Weakness

Tesla’s aggressive investment plans add another layer of risk. Management expects capital expenditures to exceed $20 billion in 2026, sharply higher than roughly $8.5 billion last year and above the previous peak of $11.3 billion in 2024.

The spending will fund six major facilities, including factories for a refinery, LFP batteries, CyberCab, Semi, a new megafactory and Optimus. Tesla also plans heavy investment in AI compute infrastructure to support full self-driving, robotaxis and robotics.

While these investments could create long-term opportunities, they come at a time when Tesla’s core EV business is slowing. Deliveries declined for the second consecutive year in 2025. After slipping just 1% in 2024, the drop widened to more than 8% in 2025.

Basically, Tesla is committing large sums upfront while revenue contributions from AI, robotaxis and robotics are still uncertain and likely years away. This increases near-term financial pressure.

TSLA Price Performance, Valuation & Estimates

Over the past six months, shares of Tesla have gained 19%, underperforming the industry.

Based on its price/sales ratio, the company is trading at a forward sales multiple of 15, way higher than the broader industry and its own 5-year average. Tesla’s valuation has historically remained disconnected from near-term fundamentals, but that does not eliminate downside risk. Much of the optimism surrounding its long-term autonomy and AI bets is already priced in. TSLA carries a Value Score of F.

The Zacks Consensus Estimate for Tesla’s EPS has been southbound over the past 60 days.

Bottom Line

Tesla’s long-term ambitions in autonomous driving, robotaxis and humanoid robots are undeniably bold. However, execution risks remain high. The company significantly trails Waymo in fully driverless technology, its robotaxi expansion targets carry a history of delays, and Optimus is far from proving its commercial scale.

At the same time, Tesla’s core EV business is weakening, and capital spending is set to surge. Until the company delivers tangible, large-scale results in autonomy and robotics, investing purely on ambitious projections appears premature.

It may be prudent for investors to avoid the stock for now rather than buy or hold it solely on long-term AI and autonomy promises.The company carries a Zacks Rank #4 (Sell) currently.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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