Elon Musk's next trillion-dollar track? UBS elaborates on the Robotaxi business model

Investor interest in Tesla's Robotaxi has surged, especially after Tesla launched its first Robotaxi service in Austin on the 22nd.

According to a previous article from Wall Street Insight, the Robotaxi currently operates with only 10 vehicles, with operating hours limited from 6 AM to midnight, and it only runs within a geofenced area. Most importantly, the vehicles are still equipped with safety operators and remote operators, with a uniform charge of $4.20.

According to news from the Wind Trading Desk, UBS released a research report on the 23rd, indicating that if everything goes as planned (including technology, regulation, network construction, and scaling), this could be a huge market. By 2040, Tesla's Robotaxi network in the U.S. is expected to expand to a scale of 2.3 million vehicles, with annual revenue potentially reaching $203 billion, contributing up to $86 billion in after-tax operating profit for the company.

The company not only independently develops the FSD system but also has vehicle manufacturing capabilities and an operational platform. This vertical integration capability makes Tesla the only company currently able to package "vehicle + software + network platform" together.

Based on this, UBS assigned a valuation of $350 billion to Tesla Network's business, raising Tesla's target price from $190 to $215. As of the time of publication, Tesla's pre-market stock price was $327. Nevertheless, UBS maintains a "sell" rating on Tesla, believing that while the prospects for Robotaxi are enticing, the market has already fully priced it in, making Tesla's current valuation "unsustainable."

$203 Billion Potential Market, Robotaxi May Become New Growth Core

The UBS team used Austin as an example to analyze Tesla's upcoming first Robotaxi service and conducted a 15-year commercial modeling based on conservative assumptions. The model shows that by 2040, the Robotaxi fleet of Tesla Network could reach 2.3 million vehicles, covering both self-owned vehicles and externally "contributed" vehicles.

Of these, about 40% of the vehicles will be owned by Tesla, while 60% will be purchased by individuals or fleet companies and then connected to Tesla Network, similar to the "hosts" role in Airbnb. Assuming each vehicle operates 8 hours a day at a speed of 25 miles per hour, the average annual operating mileage for Robotaxi could reach 49,000 miles.

UBS expects that by then, the total annual revenue of Tesla Network could reach $203 billion, with the self-owned fleet contributing $143 billion and the contributed fleet contributing about $60 billion (based on a 30% platform commission), resulting in an overall gross margin of 72% and a net profit margin of 42%

Full Industry Chain Integration, Tesla Builds "Autonomous Driving Closed Loop"

UBS's research report emphasizes that compared to Robotaxi competitors like Waymo and Mobileye, Tesla's greatest advantage lies in its vertical integration capabilities. The company not only independently develops the FSD (Full Self-Driving) system but also possesses vehicle manufacturing capabilities and an operational platform.

This makes Tesla the only company currently able to package "vehicle + software + network platform" together. UBS believes that this structural advantage allows Tesla to benefit simultaneously from:

• Vehicle sales profits;
• Subscription revenue from FSD software;
• Commission income from the Robotaxi platform.

Additionally, Tesla can dynamically adjust supply through the platform mechanism, avoiding the risk of resource idleness caused by high and low peak fluctuations under a single model.

Cost Calculation: Average Operating Cost of Robotaxi Approximately $0.86/Mile

The research report cites data from the New York taxi industry (TLC) and provides a detailed calculation of Robotaxi operating costs. For the year 2040, Tesla's total cost per mile is approximately $0.86, with the main components including:

• Insurance costs: $0.30;
• Vehicle depreciation: $0.10;
• Maintenance and cleaning: approximately $0.18;
• Charging costs: $0.12;
• Parking and registration and other fees: $0.16.

With a charging level of $3 per mile, the unit gross margin of Robotaxi will exceed 70%, making the economic model highly attractive.

Profitability and Valuation Analysis

From a financial perspective, UBS expects the Tesla Network business to remain in a loss state in 2027, but with scale expansion and improved operational efficiency, it will achieve profitability by 2030, with an after-tax operating profit (NOPAT) of $8.6 billion by 2040, a gross margin of 72%, and an EBIT margin of 55%.

Additionally, the fleet contribution part does not require Tesla to bear vehicle costs, mainly charging software and platform service fees, with profit margins as high as 92%, becoming an important source of cash flow for the company.

In terms of valuation, UBS has given the Tesla Network business a valuation of $350 billion, equivalent to $99 per share. Tesla's current stock price is $321.87, which means that the Robotaxi business theoretically accounts for 31% of the current valuation

Investor Reminder: Great Imagination, Long Realization Cycle

Although Robotaxi shows great potential in terms of business model, profit margins, and industry disruption, UBS reminds investors that the current valuation of Tesla already fully incorporates these expectations.

Robotaxi is a future business that requires a long realization cycle, involving multiple uncertainties such as technology, policy, and user habits. Before the relevant technology is widely implemented, the high valuation given by the market may be difficult to sustain.

Therefore, UBS advises that investors, when evaluating Tesla, need to weigh the "long-term growth potential" against the reality gap of "current performance realization," and avoid high-level purchases driven by emotions