The Zacks Analyst Blog Tesla, General Motors and Ford

Tesla shareholders have approved CEO Elon Musk's controversial $1 trillion performance-based compensation package, signaling strong confidence in his vision for the company's future in AI, robotics, and autonomous vehicles, despite the ambitious targets required by 2035, including an $8.5 trillion market capitalization. This approval comes as Tesla's core EV business faces significant challenges, including declining sales and squeezed margins, leading to underperformance compared to peers like GM and Ford year-to-date. The company's future growth and the payout's realization are now heavily reliant on the successful, yet currently unproven, commercialization of these futuristic technologies amid intense competition and regulatory hurdles.

Analysis

Tesla shareholders approved Elon Musk's controversial $1 trillion performance-based pay package, with approximately 75% voting in favor. This signals strong investor confidence in Musk's long-term vision, which pivots Tesla towards AI, autonomous vehicles (AVs), and robotics. The package ties Musk's remuneration to aggressive 2035 targets, including an $8.5 trillion market capitalization and $400 billion in adjusted EBITDA, demanding substantial execution.

However, Tesla's core EV business faces significant headwinds, evidenced by its first annual delivery decline in 2024 and a 13% year-over-year sales drop in Q1 and Q2 2025. Q4 sales are expected to decline further due to expiring U.S. tax credits and intensified Chinese competition. Automotive margins are also under pressure from price cuts, high costs, and tariffs, indicating a weakening market position.

Tesla's ambitious ventures into robotaxis, humanoid robots, and AI are currently far from commercial reality, with competitors like Waymo leading in driverless technology. This strategic pivot occurs as TSLA shares have underperformed peers like GM (+32% YTD) and Ford (+29% YTD), rising only 10% year-to-date. Tesla's forward price-to-sales ratio of 13.93 remains significantly higher than the industry average and competitors, despite its "D" Value Score and Zacks #3 (Hold) rank.

Key Decisions for Investors

• Monitor Tesla's progress in commercializing its AI, robotaxi, and humanoid robot initiatives, as the success of these unproven ventures is critical for future growth and the realization of Musk's ambitious pay package.
• Assess the ongoing challenges in Tesla's core EV business, including declining sales, margin pressures, and intensifying competition, which could impact near-term financial performance.
• Re-evaluate Tesla's premium valuation multiples (13.93x forward P/S) relative to its underperforming stock and the significant execution risks associated with its strategic pivot, especially compared to more conservatively valued peers.