Tesla's Mixed Q3 Overshadowed by FSD Skepticism from Former Employee

What happened

Tesla reported a mixed third quarter with strong top-line revenue but persistent pressure on automotive margins, as highlighted in the DeepValue report. A former employee has publicly urged skepticism about the extent of Tesla's full self-driving capabilities, casting doubt on a key growth pillar. This aligns with the report's emphasis on FSD monetization as a critical watch item, where regulatory or utilization setbacks could tilt the investment case negatively. Despite improvements in energy storage margins and a solid balance sheet, the FSD concerns amplify existing risks from uneven EV adoption and competitive intensity. Overall, Tesla's transition to an autonomy-focused platform faces heightened scrutiny amid these developments.

Implication

The former employee's warning on FSD capabilities increases the risk that Tesla's high valuation, which embeds substantial autonomy optionality, may not be justified if monetization lags. This skepticism compounds existing headwinds from automotive margin compression and plateauing EV adoption in key regions like Europe and the U.S. Investors must closely monitor FSD subscription growth, Robotaxi utilization, and regulatory approvals to gauge whether revenue projections are achievable. While Tesla's strong cash position and energy storage growth offer some downside protection, they are unlikely to fully offset potential FSD disappointments. A prudent approach involves demanding more transparency on FSD progress before considering any upgrade from the current HOLD rating.

Thesis delta

The skepticism from a former employee reinforces the DeepValue report's caution on FSD monetization, increasing the downside risk to Tesla's valuation. It underscores that overreliance on autonomy promises without concrete evidence could exacerbate the limited margin of safety, potentially warranting a more defensive stance if FSD milestones are not met.