Over 10% increase in two days! Tesla's stock price skyrocketed, what happened?

On Friday, the 12th, Eastern Time, Tesla's stock price opened high and continued to rise, reaching an intraday high with an increase of about 7.4% around noon, later narrowing the gain to within 7%. If this upward trend continues until the close, it will erase all declines over the past seven and a half months, setting a new high since the end of January.

By Friday's trading session, Tesla's stock price had accumulated a rise of over 10% in the last two days, far ahead of other tech giants and the broader market. Why did Tesla explode? What happened?

From recent news, Tesla's surge is largely unrelated to its traditional electric vehicle business; the most direct benefit comes from Tesla's autonomous taxi service, Robotaxi.

Reports on Friday indicated that on Thursday, news broke that Tesla had received approval from the state of Nevada to test its Robotaxi service on public roads in the state, which drove Tesla's stock price to close up about 6% on Thursday. On Friday, another media outlet confirmed this news with the relevant Nevada authorities.

The stock performance shows that investors are optimistic about Tesla's expansion prospects in the fields of autonomous driving and AI. Tesla CEO Elon Musk stated earlier this month that Tesla could derive 80% of its long-term value from its humanoid robot Optimus business, while the company is working to expand its emerging Robotaxi business.

This week, Tesla launched its next-generation energy storage products, Megapack 3 and the Megablock system, claiming they can significantly shorten installation time and reduce construction costs, which is also seen as a major driver.

Additionally, Tesla's board announced an unprecedented compensation plan for Musk last week, with a potential value of up to $1 trillion, aimed at ensuring this key leader remains focused on Tesla's development over the next decade. This opened up the "imagination space" for Tesla's robots and left room for a merger with xAI, which is also viewed as a positive for Tesla. On the day the plan was announced, last Friday, Tesla's stock rose by 3.6%.

Tesla Chair Robyn Denholm publicly supported Musk's compensation plan on Friday, stating that only Musk can lead the company in its transformation towards artificial intelligence (AI) and robotics over the next decade.

Nevada Confirms Testing Permit Issued This Week

On Thursday, Tesla supporter Sawyer Merritt, who has over 957,000 followers on social media platform X, posted that on Thursday, the Nevada Department of Motor Vehicles (DMV) commercial licensing office approved Tesla's testing registration certification, which he confirmed with the DMV, and that "the autonomous driving license and registration certificate were also mailed to Tesla yesterday (Wednesday)."

On Friday, a DMV representative confirmed to the media that Tesla submitted its testing registration certification on September 3rd, the previous Wednesday, and it was processed by the Office of Business Licensing (OBL) team this Wednesday.

DMV spokesperson Hailey Foster explained that this means Tesla is currently authorized to test autonomous vehicles in the state, but cannot yet deploy these vehicles as a regular operational service. She wrote in an email:

"Tesla still needs to complete the operational self-certification process before launching full projects, such as Robotaxi."

Comments point out that Nevada has a relatively friendly regulatory environment for testing autonomous vehicles. Tesla only needs to fill out a testing registration permit form, and after review by the state Department of Motor Vehicles, it can obtain a compliance certificate and a red test license plate. However, to officially operate a commercial robotaxi service, Tesla still needs to complete the "operational self-certification" process. Obtaining certification will allow Tesla to operate services similar to those it launched in Austin in June.

Musk Accelerates Robotaxi Expansion

Tesla began offering Robotaxi services powered by the Model Y SUV in Austin, Texas, on June 22 this year and expanded such services to the California Bay Area by the end of July.

On July 23, Musk outlined the roadmap for Robotaxi expansion during Tesla's second-quarter earnings call. He said:

"We expect to significantly expand the service area and hope to achieve coverage far exceeding our competitors within a week or two. We will obtain regulatory approval to launch this service in the (California) Bay Area, Nevada, Arizona, Florida, and several other regions. Once approved and proven safe, we will roll out the autonomous ride-hailing service across most of the United States.

I believe that by the end of this year, we will be able to cover about half of the U.S. population. This is at least our goal, provided we receive regulatory approval."

Last week, Musk stated that Tesla might remove the requirement for a safety driver in the current Robotaxi service by the end of this year. He posted on X: "The safety driver is only needed in the initial months to ensure extra safety. By the end of the year, a safety driver should no longer be necessary."

Earlier this week, media reports indicated that Tesla has begun applying for approvals at several airports in California to allow its autonomous ride-hailing service to pick up and drop off passengers at the airports.

Energy Business Launches Revolutionary Products

Tesla released the Megapack 3 and Megablock energy storage systems this Monday.

Subsequently, analysts believe these new products are game changers for the energy storage business.

The Megapack 3 is the company's latest battery storage system, featuring updated battery technology and electronics. The Megablock, as a pre-engineered system, integrates batteries, switchgear, and transformers, achieving a 23% installation speed increase and a 40% reduction in construction costs.

William Blair analyst Jed Dorsheimer stated that this reflects Tesla's core advantages in "manufacturing expertise, streamlined processes, and vertical integration."

Tesla's energy storage business generated approximately $11 billion in sales over the past 12 months, a year-on-year increase of 43%. Energy storage capacity deployed reached 37.9 gigawatt-hours, an 83% year-on-year increase, enough to power about 4,000 American households for a year. Although the energy storage business accounts for only 12% of total sales, it is experiencing strong growth, while the automotive business is about seven times the size of the energy storage business Musk stated on the X platform that the company has also begun producing its own transformers. Analysts pointed out that with the cancellation of the U.S. environmental tax credits in the second half of this year, attention should be paid to changes in profit margins.

Chairman Says Only Musk Can Lead Tesla's AI and Robotics Transformation

Tesla Chairman Robyn Denholm stated in a media interview on Friday that no one other than Musk can lead the company in its transformation towards AI and robotics. Denholm said:

"He is a leader of a generation. There is no one like Musk who can truly lead this company over the next decade."

While Musk will still be involved in external company affairs, Denholm provided strong endorsement for Musk, pointing out that past achievements have proven that Musk can still deliver results for Tesla. She said:

“He has always been that way. From our perspective, channeling his creativity into various businesses outside of Tesla is actually beneficial for Tesla.”

The compensation plan for Musk, announced by the Tesla board last week, will be voted on by shareholders in November.

Relevant documents show that the latest CEO reward is valued at $87.8 billion, which could balloon to about $1 trillion if Musk meets all performance targets and receives all restricted stock. This incentive plan requires Musk to achieve a series of ambitious goals over the next decade, including raising Tesla's market value to $8.5 trillion, delivering 20 million electric vehicles, producing 1 million Robotaxis, and 1 million humanoid robots.

The compensation plan aims to increase Musk's ownership stake to at least 25%, enhancing his voting power in the company. Tesla acknowledged in regulatory filings that Musk had "genuinely" threatened to leave the company if he did not receive guarantees of control and compensation for past services.

For Tesla, succession planning has become a more prominent issue, as Musk has been seeking a larger stake and has hinted in public comments that he may develop AI and other businesses in other areas without greater control. This compensation plan requires Musk to participate in the development of a long-term CEO succession framework.

Denholm mentioned the succession planning process for Tesla on Friday. She acknowledged the possibility of Musk transitioning to other leadership roles, such as Chief Product Officer, stating that this was "considered" in the compensation plan.

Denholm said that CEO succession "is probably the most common question investors ask me." If Tesla suddenly needs a new leader, the company will have an emergency plan in place, and the compensation plan also includes a long-term process for finding Musk's true successor.

She said, “We want to ensure that we have the right leader at some point in the future for an orderly transition. Therefore, incorporating succession planning into this is something we have thought through carefully.”

Deep Considerations Behind the Trillion-Dollar Compensation Plan

This record-breaking compensation plan was proposed after Musk's 2018 compensation package, valued at over $50 billion, was rejected by a Delaware court. The Tesla board also granted Musk a temporary stock award worth about $30 billion in early August this year Morgan Stanley analysts believe that the most significant meaning of the plan lies in making the delivery volume of "robots" and adjusted EBITDA substantial growth as core assessment criteria. The plan defines "robots" as "any robot or other entity product that moves using artificial intelligence," opening up vast imaginative space for Tesla in the robotics field.

The compensation plan also includes key terms that allow for adjustments to performance targets in the event of a "significant" acquisition, interpreted as paving the way for a potential merger between Tesla and Musk's artificial intelligence company xAI. Tesla's regulatory documents contain a non-binding proposal to invest in xAI, and the two companies have already collaborated in several areas.

Analysts point out that to achieve the maximum EBITDA target of $400 billion, there needs to be a significant contribution from the "Optimus robot and other AI robot terminal markets." Musk stated this month that 80% of Tesla's long-term value could come from the Optimus humanoid robot.

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