Tesla's Autonomous Driving: Revolution is Near!

Tesla, as it approaches a significant threshold in its leadership in autonomous driving, this situation has the potential to create a substantial value erosion in modern industrial history. A new report published by Melius Research emphasizes that this process will accelerate rapidly and that major changes are on the horizon.

Analyst Rob Wertheimer noted that the firm classifies Tesla as "a must-have stock," stating, "the world is facing a fundamental change." Quoting the famous writer Ernest Hemingway, he said, "bankruptcy comes in two ways, first slowly, then suddenly," indicating that this dynamic also applies to autonomy. However, Wertheimer added, "it's not Tesla that's at risk here, but everyone else."

Melius argues that the years of gradual progress in the autonomy field are coming to an end and we are reaching the point of widespread adoption. According to the analyst, this transformation will create a significant change in the $7 trillion autonomy market.

Wertheimer pointed out that "hundreds of billions of dollars in value erosion will shift to Tesla within the next five years." However, public awareness is still low. Wertheimer mentioned that “only one in 100 Americans has experienced being in a vehicle with autonomous driving,” adding that only “tens of thousands of people” have tested Tesla's latest controlled Full Self-Driving (FSD) system. When widespread distribution begins, "this will still be surprising for most people."

According to Melius, the trigger factor is the accelerating developments in Tesla’s full autonomous software. Currently, the software version 14.1.7 includes the transition to an end-to-end neural network during the 2021/22 period, significant increases in training computational power, and the upcoming “AI5 chip” hardware. Wertheimer noted that all these elements are progressing faster in the autonomy field than investors realize.

In particular, Melius claims that Tesla’s advantage is not shrinking but rather expanding. “Strategic choices like chips, vertical integration, software, and thinking of the vehicle differently have left traditional automakers facing old architectures and fragmented supply systems.”

During this period of accelerating adoption of Driverless vehicles, Melius commented that “the metaphor of %buggy whip% commonly used in investments will resurface; driverless cars will replace horse-drawn carriages.”