Two days up over 10%! Tesla's stock price surges—what happened?

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On Friday the 12th, Eastern Time, Tesla’s stock price opened high and rose higher during the day, reaching a daily high with an increase of about 7.4% at midday. The gain later narrowed slightly to below 7%. If the momentum holds until the market closes, it will erase all the declines from the past seven and a half months and end at its highest closing since the end of January.

As of Friday's session, Tesla’s stock had surged over 10% in the past two days, far outperforming other tech giants and the broader market. Why has Tesla exploded? What happened?

Recent news suggests this surge is not much related to Tesla’s traditional electric vehicle business. The direct upside comes from Tesla’s autonomous taxi service Robotaxi.

On Friday, there were reports that on Thursday, news emerged that Tesla had received approval from the Nevada state government to test its Robotaxi service on public roads in the state. This news drove Tesla’s stock up by about 6% on Thursday. On Friday, the Nevada authorities confirmed this information to the media.

Stock performance indicates that investors are full of anticipation for Tesla’s prospects in autonomous driving and AI. This month, Tesla CEO Elon Musk stated that the company could derive 80% of its long-term value from its humanoid robot Optimus business and is working to expand the emerging Robotaxi business.

This week, Tesla also launched new generation energy storage products—Megapack 3 and the Megablock system—claiming they significantly reduce installation time and construction costs, which has also been seen as an important boost.

In addition, Tesla’s board last week unveiled an unprecedented Musk compensation package with a potential value up to $1 trillion, meant to ensure the key leader remains focused on Tesla’s development over the next decade. This “trillion-dollar salary package”, which opens Tesla’s “imagination space” around robotics and leaves room for a potential xAI merger, has also been seen as positive for Tesla. On the day the plan was announced, Tesla closed up 3.6% last Friday.

Tesla Chair Robyn Denholm publicly backed Musk’s compensation plan this Friday, saying that only Musk is capable of leading the company’s transformation to artificial intelligence (AI) and robotics over the next decade.

Nevada Confirms Testing Permit Was Issued This Week

On Thursday, Tesla supporter Sawyer Merritt, who has over 957,000 followers on social media X, posted that Nevada’s Department of Motor Vehicles (DMV) commercial licensing office approved Tesla's testing registration certification on Thursday. He received confirmation from DMV and wrote that the “autonomous driving license and registration certificate were sent to Tesla yesterday (Wednesday).”

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

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

“Tesla still needs to complete the operational self-certification process before launching a full project such as Robotaxi.”

Commentators note that Nevada’s regulatory environment for autonomous vehicle testing is relatively favorable. Tesla only needs to fill out the testing registration permit form and, after review by the DMV, receive a compliance certificate and red test license plates. However, to formally operate a commercial Robotaxi service, Tesla still needs to complete the “operational self-certification” process. Once certified, Tesla would be allowed to operate in Nevada a service similar to the one it launched in Austin in June.

Musk Accelerates Robotaxi Expansion

On June 22 this year, Tesla began offering its Robotaxi service for the first time in Austin, Texas, using the Model Y SUV, and expanded the service to the Bay Area in California at the end of July.

On July 23, during Tesla’s Q2 earnings call, Musk outlined the Robotaxi expansion roadmap. He said:

“We expect to greatly expand the service area and hope to achieve coverage far beyond our competitors within a week or two. We will obtain regulatory approval and launch the service in the (California) Bay Area, Nevada, Arizona, Florida, and several other locations. Once approved and safety demonstrated, we will launch autonomous ride-hailing services in most of the U.S.

I think, by the end of this year, we could cover half the U.S. population. At least that's our goal, assuming regulatory approval.”

Last week, Musk said Tesla might remove the requirement for a safety driver in its Robotaxi vehicles by the end of this year. He posted on X: “The safety driver is only needed for the first few months for extra caution. Shouldn’t need a safety driver by year-end.”

Earlier this week, some media reported that Tesla has begun applying for approvals at several airports in California, seeking to allow its driverless ride-hailing service to pick up and drop off passengers at airports.

Energy Storage Business Launches Groundbreaking Products

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

Subsequently, some analysts deemed these releases “game changers” for the energy storage business.

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

William Blair analyst Jed Dorsheimer stated that this reflects Tesla’s “manufacturing know-how, process simplification, and core advantages in vertical integration.”

In the past 12 months, Tesla’s energy storage business recorded about $11 billion in sales, up 43% year-over-year. Energy storage capacity installation reached 37.9 GWh, up 83% year-over-year—enough to power about 4,000 American homes for a year. Although energy storage only accounts for about 12% of total sales, its growth is strong, while the automotive business is about seven times larger in scale.

Musk posted on X that the company has also started producing its own transformers. Analysts pointed out that as U.S. clean energy tax breaks expire in the second half of this year, changes in profit margins will need close attention.

Chair Says Only Musk Can Lead Tesla’s Transformation to AI and Robotics

Tesla Chair Robyn Denholm said in a media interview on Friday that nobody but Musk can lead the company’s pivot to AI and robotics. Denholm said:

“He is a generational leader. There is no one else like Musk who can truly lead the company for the next decade or so.”

Although Musk is still involved with external businesses, Denholm gave strong backing, noting that past achievements show Musk can still deliver for Tesla. She added:

“He has always been that way. In our view, having his creativity involved in other businesses outside Tesla actually helps Tesla.”

Tesla’s board announced Musk’s compensation package last week, to be voted on by shareholders in November.

Related documents show that the latest CEO award is valued at $87.8 billion, and if all performance targets are met and all restricted stock is granted, that figure could swell to about $1 trillion. This incentive plan requires Musk to deliver on a series of ambitious targets over the next decade, including pushing Tesla’s market cap to $8.5 trillion, delivering 20 million electric cars, producing 1 million Robotaxis, and 1 million humanoid robots.

The compensation plan aims to raise Musk’s shareholding ratio to at least 25%, boosting his voting power in the company. Tesla’s regulatory filings acknowledge that Musk “sincerely” threatened to leave the company if not given guarantees of control and past service compensation.

For Tesla, succession planning has become increasingly prominent as Musk seeks greater shareholding and has publicly hinted at developing AI and other businesses elsewhere if not granted greater control. This salary package requires Musk to participate in drafting a long-term CEO succession framework.

Denholm on Friday mentioned Tesla’s succession planning process. She admitted it is possible Musk could transition to a role such as chief product officer, calling it “considered” in the pay plan.

Denholm said CEO succession “is probably the question investors ask me most.” If Tesla suddenly needs a new leader, the company will have an emergency plan, and the compensation plan includes a long-term process to find Musk’s true successor.

She said: “We want to ensure we have the right leader in place at some point in the future to ensure an orderly transition. So incorporating succession planning is something we’ve thought about very carefully.”

Deeper Considerations Behind the Trillion Dollar Compensation Plan

This record compensation package was put forward after Musk’s $50+ billion pay package from 2018 was struck down by a Delaware court. In early August, Tesla’s board also awarded Musk approximately $30 billion in interim stock rewards.

Morgan Stanley analysts believe the most important aspect of the plan is the focus on “robot” deliveries and a big jump in adjusted EBITDA as the core assessment criteria. The plan defines “robots” as “any robot or other physical product that achieves mobility through AI,” opening a vast imagination space for Tesla in robotics.

The pay plan also includes key clauses allowing performance targets to be adjusted in the event of a “significant” acquisition activity, interpreted as paving the way for Tesla’s potential merger with Musk’s AI company, xAI. Tesla’s regulatory filings include a non-binding proposal to invest in xAI, and the two companies have already had joint projects in various fields.

Analysts pointed out that hitting the maximum $400 billion EBITDA target will require massive contributions from the Optimus robots and other AI robotic end-markets. This month, Musk said that 80% of Tesla’s long-term value could come from the Optimus humanoid robot.

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