Tesla’s stock has rebounded sharply this year after a turbulent start, reaching an all-time closing high of $489.88, up 3.1% on Tuesday.
The shares are now 21% higher for 2025, recovering from a 36% plunge in the first quarter, the stock’s worst period since 2022.
Catalyst: Robotaxi Testing
Investors were buoyed after CEO Elon Musk announced that Tesla is testing driverless vehicles in Austin, Texas, with no occupants, nearly six months after launching the pilot program with safety drivers.
The stock’s rally has pushed Tesla’s market cap to $1.63 trillion, making it the seventh-most valuable publicly traded company.
Musk’s net worth now stands at roughly $684 billion, more than $430 billion ahead of Google co-founder Larry Page.
Market Optimism and Challenges
Investors view the driverless trials as a step toward Tesla’s long-promised robotaxi service.
However, automated driving systems in Austin are not yet widely available, and multiple safety concerns remain.
Tesla’s year began under scrutiny due to Musk’s political activities, including his role in President Donald Trump’s Department of Government Efficiency.
Endorsements of far-right figures and controversial statements have led to consumer backlash, impacting brand reputation and sales.
First-quarter deliveries fell 13%, with automotive revenue down 20%.
The second quarter saw a stock rebound, though sales continued to decline with a 16% drop in auto revenue.
Strong Recovery in the Second Half
Tesla experienced a revenue increase of 12% in the third quarter as US buyers rushed to take advantage of a federal tax credit that expired in September.
The stock rose 40% during this period.
Business challenges persist, including the end of the tax credit, backlash against Musk, and strong competition from lower-cost or more appealing EVs in China and Europe.
Tesla’s October release of more affordable Model Y and Model 3 variants has so far not boosted US or European sales.
According to Cox Automotive, November US sales fell to a four-year low, with cheaper models cannibalizing higher-priced options.
Analyst Outlook
Despite these challenges, Mizuho raised Tesla’s price target to $530 from $475, maintaining a buy rating.
Analysts highlighted that improvements in Tesla’s Full Self-Driving technology “could support an accelerated expansion” of its robotaxi fleet in Austin and San Francisco.
Currently, Tesla’s Robotaxi service operates in Texas and California with human supervisors on board, but full autonomous deployment could follow.