Tesla’s “flywheel”: Optimus in the long term, Robotaxi in the short term

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Tesla is building a mutually reinforcing growth logic around Robotaxi and Optimus—Robotaxi commercialization is the most important near-term catalyst for the stock price this year, while Optimus is the company’s long-term bet on a transition to physical AI. These two main lines together constitute what Morgan Stanley refers to as Tesla's "flywheel."

According to Zhuifeng Trading Desk, Morgan Stanley analyst Andrew S Percoco attended the San Francisco TMT conference and conducted an on-site inspection of the Texas Gigafactory, after which he expressed a “marginally more optimistic” view on the commercialization prospects of Robotaxi, especially positive feedback on the company’s progress in solving edge cases such as passenger pickup and drop-off. The report maintains an Equal-weight rating for Tesla with a target price of $415, and the plan for mass production of Cybercab remains scheduled to begin in April 2026.

Morgan Stanley’s "Robotaxi flywheel" logic is: Every mile of driving data accumulated by unsupervised Robotaxi continuously optimizes the underlying autonomous driving model, which in turn accelerates the unsupervised transformation of personal FSD (Full Self-Driving), driving up FSD adoption rates, improving automotive demand, and increasing free cash flow. This means that the success of Robotaxi commercialization is not only a source of revenue for mobility services, but is also an important lever to boost the core automotive business.

However, this strategic layout comes with significant short-term financial pressure. Morgan Stanley expects Tesla’s capital expenditure in 2026 to exceed $20 billion, more than double year-over-year, with an approximate free cash flow deficit of $8 billion for that year. Tesla’s roughly $44 billion cash reserve provides some cushion in the near term, but if the recovery in the automotive business falls short of expectations, Morgan Stanley does not rule out the possibility of the company seeking opportunistic financing in 2027.

Robotaxi: Austin is the real test ground for unsupervised deployment

In Tesla's current Robotaxi deployment, hundreds of vehicles have already been deployed in the San Francisco Bay Area, but California regulations still require a safety monitor in the driver's seat, so Austin is the main testing ground for real unsupervised deployment. Morgan Stanley expects the Tesla Robotaxi fleet to reach around 1,500 vehicles by the end of 2026.

Tesla intends to slow down the operational pace in Austin to optimize operating strategies and plans to expand Robotaxi to seven additional cities in the first half of 2026. The company notes that the transition from supervised to unsupervised in new cities is expected to be shorter than the approximately six months experienced in Austin. In the short term, fluctuations in NHTSA accident data are seen as normal model stress tests, with problems mainly concentrated in the pickup/drop-off process, a unique edge case in ride-hailing—this is also a scenario difficult to cover with Tesla’s current FSD driving mileage data.

In terms of cost structure, Morgan Stanley believes Tesla has significant structural advantages. Based on Model Y estimates, Tesla’s total cost is about $0.81 per mile, lower than Waymo’s $1.43 and traditional ride-hailing’s $1.71 per mile. As Cybercab scales up, Morgan Stanley expects cost to further drop to $0.37 per mile by 2035, close to management’s long-term Cybercab target of about $0.30 per mile.

Cybercab: Disruptive manufacturing process supports cost competitiveness

Cybercab’s low-cost advantage partly comes from its innovative manufacturing process. Tesla adopts a modular “unboxed” architecture at the Austin Gigafactory, replacing traditional body-in-white, paint, and sequential assembly processes. The vehicle is composed of five main modules: front, central battery, rear cargo, and two side modules, which are produced in parallel and then merged. The exterior body panels are all plastic, manufactured via reaction injection molding, with color directly infused into the plastic. This process eliminates the traditional paint shop and greatly reduces factory footprint.

Morgan Stanley believes whether Cybercab can start mass production as planned in April 2026 is a key milestone to verify these cost targets and will directly impact Robotaxi’s scaling process.

Optimus: Long-term narrative, implementation still needs time

Compared to Robotaxi’s relatively clear progress, Optimus is still in the early stages. Morgan Stanley expects Optimus Gen 3 release may be postponed until Q2 2026 but sees the more critical milestone as the start of mass production (SOP) in the second half of 2026.

Humanoid robots coming off the production line in 2026 are expected to have rather limited functionality. Tesla even suggests establishing an “Optimus Academy” specifically for data collection, model optimization, and robotics training. Moreover, most of the new computing power added to the Cortex 2 supercomputing center will be allocated for Optimus training. Elon Musk disclosed on X that Tesla is developing “Digital Optimus”—a task orchestration tool for Optimus and even Cybercab.

Among the five major components of Morgan Stanley's $415 target price, Optimus (humanoid robot) contributes $60 per share, but is discounted at a 50% probability, reflecting the market’s strong uncertainty about its commercial implementation. By contrast, network services (including FSD subscriptions) contribute $145 per share, and Tesla mobility business (Mobility) contributes $125 per share, making them the two main pillars of the target price.

Energy business: Stable growth logic, near-term margin pressure

Tesla’s energy business remains an important growth driver, with strong demand on both the front-end grid side and back-end user side. The company is adding 50 GWh of Megapack capacity in Houston while advancing a 7 GWh localized LFP battery line.

However, Morgan Stanley cautions that attention should be paid to gross margin pressure in the energy business in the near term—intensified pricing competition and the delayed transmission of tariff impacts are expected to compress energy business margins to the mid-20% range this year. In terms of the core automotive business, Tesla has stopped production of Model S/X but does not rule out new models, including derivatives based on the Cybertruck platform, Model YL in new regions, and Roadster.

Morgan Stanley notes that as Tesla transitions toward physical AI and robotics, maintaining profitability in core automotive (including FSD) and energy businesses is the foundational premise supporting the current valuation (corresponding to ~40 times 2030 EBITDA).

Capital Expenditure Peak: Ample cash but financing risks cannot be ignored

Morgan Stanley expects Tesla’s capital expenditure in 2026 (excluding the Terafab project) to exceed $20 billion, doubling over the previous year, resulting in a roughly $8 billion free cash flow gap that year; 2027 capital expenditure is expected to ease to around $16 billion, and as EV demand is expected to recover and margins improve, free cash flow is expected to approach breakeven by then.

Main variables affecting capital expenditure trajectory include: Optimus robot procurement for internal training (over $250,000 per unit); pace of Robotaxi fleet expansion (Morgan Stanley expects Tesla will deploy around 3,000 cars via owned assets in 2027); incremental computing power needed for FSD and Optimus training; and the scale of Tesla’s self-developed chip manufacturing plant construction—Morgan Stanley estimates total investment in this project may reach $35–45 billion.

Tesla’s ~$44 billion cash reserve provides near-term support for these massive capital plans. However, Morgan Stanley clearly states that if high capital expenditures persist and automotive business improvement falls short, the possibility of Tesla initiating opportunistic financing in 2027 cannot be ruled out.

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