Tesla Surpasses $1.6T Valuation on Robotaxi Hopes, Ford Writedown Fallout

Tesla Stock Breaks Record Amid Regulatory Scrutiny

Tesla shares hit a new intraday record high of $491.50 on Tuesday, the first such milestone in nearly a year. The stock closed at $489.88, pushing Tesla's valuation to $1.63 trillion. This rally came amid optimism surrounding the company's robotaxi ambitions and as rival Ford announced a $19.5 billion writedown on its electric vehicle business.

Morgan Stanley analysts projected that Tesla could expand its robotaxi fleet to a million vehicles by 2035, fueling investor enthusiasm. Meanwhile, Ford's decision to halt production of certain large electric vehicles due to weak demand underscored the shifting landscape in the EV sector. The Tesla rally also lifted Elon Musk's net worth by $8.2 billion, as he surpassed $600 billion in estimated wealth.

The stock's gains contrasted with regulatory challenges. The California DMV warned Tesla it could face a 30-day sales suspension for misleading marketing around its Autopilot and Full Self-Driving features. However, the state gave Tesla 90 days to address the issue before any enforcement.

Why the Standoff Happened

Tesla has faced regulatory scrutiny for years over how it markets its driver-assistance systems. In 2022, the California DMV accused Tesla of using terms like "Autopilot" and "Full Self-Driving" in ways that implied the cars could operate autonomously. The state argued that these systems still require active driver supervision at all times.

An administrative law judge recently ruled that Tesla's use of such language was misleading and recommended a 30-day suspension of both its sales and manufacturing licenses. However, the DMV decided to pause the manufacturing license suspension, ensuring no disruption to Tesla's factory operations. The company has since updated its terminology to "Full Self-Driving (Supervised)" but remains under scrutiny.

The ruling reflects growing regulatory pressure across the globe as automakers introduce advanced driver-assistance systems. Authorities are increasingly concerned about consumer understanding of these technologies, especially as Tesla pushes toward wider deployment of robotaxi features.

How Markets Reacted

Despite the regulatory uncertainty, Tesla's stock has continued to rally. The record high came as Wall Street analysts expressed cautious optimism about the company's long-term potential. Wedbush analysts predicted Tesla could reach a $2 trillion market cap next year, while Goldman Sachs maintained a "Neutral" rating and $400 price target, suggesting the stock may be overvalued.

Investor sentiment was further buoyed by Tesla's recent robotaxi tests, which marked a significant step forward in autonomous vehicle development. The company's ability to innovate and capture market share in the EV and AI space has kept investors engaged, even amid regulatory hurdles according to market analysis.

However, not all news was positive. Volkswagen's battery business, PowerCo, is exploring external funding options as the automaker faces financial strain from its transition to electric vehicles. The company's CEO acknowledged the need to operate with less capital and is considering options like an IPO or strategic partnerships.

Risks to the Outlook

Regulatory challenges in California remain a key risk for Tesla. The company could see a temporary sales suspension if it fails to adjust its marketing language within the 90-day window. While the manufacturing license remains untouched, any disruption in California-Tesla's largest U.S. market-could affect short-term revenue according to regulatory filings.

Additionally, Tesla's robotaxi ambitions face broader technical and regulatory hurdles. Competitors like Waymo are already testing fully autonomous vehicles in certain markets, raising questions about how Tesla's approach will compare. The company's ability to scale robotaxi deployment without significant setbacks will be critical to investor confidence.

Looking ahead, Tesla is also preparing for a potential shift in investor attention as Elon Musk moves forward with his plans for a 2026 SpaceX IPO. The space company aims to raise over $30 billion and is targeting a $1.5 trillion valuation. The IPO could divert capital away from Tesla but could also provide Musk with additional financial leverage to strengthen his control over the electric vehicle maker according to financial reports.

For now, Tesla continues to dominate headlines in the EV sector. The company's recent performance highlights both its strengths and the challenges it faces as it races toward a future of full autonomy and interplanetary expansion. Investors will be watching closely to see whether regulatory headwinds or technological breakthroughs will shape Tesla's next chapter.