Tesla Scales Back Robotaxi Timelines and Raises Capex Guidance

Tesla's first-quarter earnings call highlighted significant hurdles for the company's autonomous driving ambitions, as CEO Elon Musk admitted that unsupervised Full Self-Driving (FSD) technology is not yet ready for wide-scale deployment. Musk noted that major architectural software improvements are required to ensure safety before the technology can be released at scale. The admission comes alongside a revised rollout strategy for Tesla's robotaxi fleet and a substantial increase in spending to support the company's AI and robotics infrastructure. Musk confirmed that vehicles equipped with Hardware 3 (HW3), produced between 2019 and 2023, will require hardware upgrades—including new computers and cameras—to effectively run FSD. To facilitate this, Tesla plans to establish microfactories in major metropolitan areas and is offering discounted trade-ins for Hardware 4 vehicles. On the financial front, Tesla raised its 2026 capital expenditure guidance by $5 billion to a total of $25 billion. This increase is earmarked for the construction of six new factories and expanded AI infrastructure to support the Optimus humanoid robot and robotaxi projects. The robotaxi timeline has been notably compressed; Musk now expects deployment in approximately a dozen states by the end of 2026, a sharp decrease from previous estimates of covering a quarter to a half of the U.S. market. Musk further noted that revenue from FSD and robotaxis is not expected to be 'super material' within the current year. Despite these headwinds, the stock saw a limited decline of approximately 2.5%, suggesting investors had already tempered their expectations.