THE ECONOMIST: Can robotaxis put Tesla on the right road? Elon Musk’s falling-out with Donald Trump won’t help

For sale: one bright red Tesla Model S, barely used. Payment in cash or crypto. Ready for collection as soon as possible from 1600 Pennsylvania Avenue.

Of all the threats made by President Donald Trump after his explosive (if not unexpected) falling out with Elon Musk, the suggestion that he may sell his recently acquired car is telling.

Mr Trump bought the car in March as a gesture of support for Tesla’s boss, whose attempts to cut government spending had provoked boycotts and attacks on showrooms.

The president’s support did little to improve Tesla’s sales. But the apparent end of the friendship could spell trouble for the carmaker’s bigger ambitions in autonomous taxis.

Investors may welcome the banishment of Mr Musk from the president’s inner circle, if it allows him to devote more time to running his car firm.

In the immediate aftermath of the messy break-up (conducted the modern way, over social media) the firm’s shares fell by 14 per cent on June 5th, but have since recovered.

One reason for the relationship’s end was Mr Musk’s vocal opposition to a tax bill — a “disgusting abomination” — that would add trillions to America’s deficit and remove subsidies on sales of electric vehicles. Mr Trump has since proposed to cut government contracts with Mr Musk’s companies, including SpaceX, his rocket firm.

That may explain why the former “first buddy” admitted on June 11th that his comments “went too far”. But Mr Trump is not the only person having second thoughts about owning a Tesla.

The company’s first-quarter results, reported in April, were as disappointing as the annual ones for 2024.

Last year the firm suffered its first fall in sales for over a decade. The next quarter could be even more of a car crash, as sales continue to drop in America and around the world.

Teasing out to what extent Tesla’s woes are caused by Mr Musk’s association with the president is tricky. There are other explanations.

A line-up relying heavily on two ageing models, growing competition and limited availability while the firm ramps up production of a new version of the Model Y have all played a part.

But falling sales may be less of a concern than Mr Trump’s attitude to Tesla’s next endeavour.

The future of the firm is autonomous cars and humanoid robots, according to Mr Musk. Where once its passenger-car technology was cutting-edge, it now has only a narrow lead over older rivals and may even trail some Chinese newcomers. “Innovation on the car side has slowed down massively,” notes Philippe Houchois of Jefferies, a bank.

Tesla plans to launch a fleet of driverless taxis in Austin, Texas, on June 22.

But relying on robotaxis is risky, not least because as Tesla’s car business falters they are not close to plugging the gap. Returns from humanoid robots are even more distant.

The service in Austin is intended to be the first of many. But Mr Musk’s hope thatms of autonomous Teslas will be roaming the streets of America by the second half of 2026 is wildly ambitious.

One obstacle is that autonomous vehicles are regulated differently with no consistent approach.

Mr Musk had hoped for a new US federal law that might have meant an easier ride for his technology in America, which critics claim is still unproven.

The chance of lighter regulations has probably blown up along with his relationship with Mr Trump.

That makes the road to profiting from robotaxis longer. Wary passengers may get used to the idea and operators may stump up the billions needed to put fleets on the road.

But it is uncertain whether the business will be more profitable than a human-driven taxi for many years, if ever.

The burning of Waymo robotaxis in protests in Los Angeles shows another unforeseen drawback to cars without a driver to mind them.

Mr Musk has done a remarkable job of building Tesla into an industry-leading carmaker.

During his spell in politics some investors questioned whether he was the right person to take Tesla forward.

With that distraction seemingly over, he now has the chance to prove them wrong. Unless robotaxis look like a winner in short order, though, the questions will only return.