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HL comment (7 November 2025)
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More than 75% of Tesla shareholders voted in favour of CEO Elon Musk’s latest compensation plan, which could be worth up to $1trn if all milestones are hit.
The tiered package consists of stock options only with no cash compensation, tied to market cap milestones ranging from $2tn to $8.5tn, coupled with operational targets such as vehicle deliveries, FSD subscriptions, and profitability.
Musk also announced that Cybercab production will start in April 2026, and the Robotaxi programme is expanding with Miami, Dallas, Phoenix, and Las Vegas coming soon.
The shares remained flat in premarket trading.
Our view
Securing Elon Musk’s pay package was an important milestone for Tesla. This should help to keep Elon’s focus on the task at hand as he looks to take Tesla through a pivotal period for the business.
Third quarter volumes were inflated by the pull-forward in demand as US tax credits come to an end, leaving some question marks around what the fourth quarter will bring. The more affordable Model 3 and Y variants should help plug the gap to some extent, but it’s still a tough market out there.
That leaves the investment case leaning heavily on 2026 - most likely the back half - when meaningful revenue from autonomous vehicles is expected to kick in. The opportunity is significant, and Tesla is arguably one of the only companies capable of delivering autonomy at scale.
The Robotaxi launch is off to a solid start and the slow and steady approach to expansion seems sensible. We get the feeling investors were hoping to hear something more concrete from Elon Musk around when safety drivers can be dropped, with the current aim being the end of the year in Texas.
Tesla’s vision-only approach is cheaper than rivals like Waymo, but it must prove its safety credentials and ability to expand fast. This will be the key catalyst for shares heading into the end of the year.
Energy storage is another promising growth area that's already adding real value. It’s a lumpy business so quarter-on-quarter trends are less important, but the longer-term growth trajectory has been impressive. As AI evolves, global power needs look to be heading one way, and Tesla's product is well placed to hopefully benefit.
Tesla is very well capitalised for a car maker, and that war chest of cash on the balance sheet provides a healthy buffer to help fund the next chapter. Further out, we have Tesla’s humanoid robot, Optimus. This has the potential to be a huge market, and the hope is that some orders start next year, but it's still very early days.
We still think Tesla has one of the best opportunities to capitalise on AI in the real world, through autonomous driving and further down the road, robotics. With Elon secured at the helm, we think the lofty valuation has a good level of support and see upside over the medium term. Regulatory hurdles around autonomous driving are the most significant near-term risk.
Environmental, social and governance (ESG) risk
Most of the auto industry falls into the medium-risk category in terms of ESG. Product governance, particularly around safety, and carbon emissions from products and services are key risk drivers. Business ethics, labour relations and direct carbon emissions are also contributors to ESG risk.
According to Sustainalytics, Tesla's management of ESG risks is strong.
Elon Musk’s political and extra-curricular activities are a risk to monitor. Tesla also has a high degree of key person risk, Elon Musk is core to the investment case and the premium valuation, to some extent, relies on his continued leadership. Governance concerns also include Elon Musk's past social media posts which impacted Tesla's share price. Other areas to watch include safety concerns around its autopilot technology and the management of its workforce.
The author and a connected party hold shares in Tesla.
Tesla key facts
Forward price/earnings ratio (next 12 months): 222.8
Ten year average forward price/earnings ratio: 113.3
Prospective dividend yield (next 12 months): 0.0%
Ten year average prospective dividend yield: 0.0%
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.
Previous Tesla Inc updates
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