Elon Musk has never turned away from big dreams and challenges. Now, the Tesla chief executive has been handed a pay package so outlandish it makes every other CEO’s bonus look tame. To claim the full reward – potentially worth more than a trillion dollars, Musk must turn Tesla into an $8.5 trillion company within ten years.
That figure would place Tesla above the combined market value of Microsoft and Nvidia, currently the world’s two corporate titans. However, currently it remains a plan on paper and shareholders are yet to decide on the plan in November.
Robotaxis are expected to support Tesla’s milestones
Tesla’s present valuation sits closer to $1 trillion, built as much on investor faith as on sales performance. With the possibility of vehicle deliveries slipping in the future as they have slipped last year, the company’s shares continue to trade on frothy multiple of 75 times of EBITDA. Investors are effectively buying into Musk’s promise of markets not yet created.
The structure of the package offers a clue to where the board sees growth coming from. The 12 milestones are tied to both profit targets and product rollouts – in particular, self-driving taxis and the so-called Optimus humanoid robot.
According to a previous Cryptopolitan report, Tesla operates a robotaxi service in Austin, Texas, although it is still tiny with perhaps a few dozen vehicles. Musk’s early goal is one million autonomous cars in circulation.
Musk’s supporters are not difficult to find. Fund group ARK Invest has been long bullish on Tesla, predicting this quarter that the company could be worth between $7 to $11 trillion by 2029. Their model assumes a global robotaxi network generating between $603 billion and $951 billion annually, dwarfing Uber’s expected $52 billion revenue this year.
ARK’s research goes further. It says Tesla’s slice of robotaxi fares would be 40% to 60%, roughly double Uber’s current cut. Notably, ARK did not even factor humanoid robots into its valuation, although it has suggested that the market could eventually be worth $24 trillion.
Musk himself has raised the stakes, declaring that Optimus could one day account for “80 per cent of Tesla’s value.”
According to a Reuters analysis, to meet the $400 billion profit target in Musk’s pay plan, the company will need to sell around 100 million robots annually, each priced at about $25,000. Even halving that figure would require doubling the company’s current margins.
To compare, Tesla’s expected EBITDA this year is $13 billion – a chasm between present reality and future ambition.
How investors ultimately price Tesla at the end of this decade may matter more than how many cars or robots it sells. At its current multiple of 75 times EBITDA, Tesla would need $113 billion of annual profit to justify an $8.5 trillion valuation – far below the $400 billion goal.
Still, Morgan Stanley analysts called the targets “materially more aggressive” than their own forecasts. They noted that such numbers “would imply substantial contributions from Optimus and other AI robot end markets currently not in our forecasts.”
The scale of Musk’s potential payout has inevitably polarized opinions. Arguments have been put forward that this is Musk dreaming big but not being realistic to his shareholders and investors.
The decision to be made by shareholders in November will be based more on belief in their CEO than on hard numbers.
What Tesla will be looking at is if it can be revolutionary and lead the robotic economy as much as it has with premium electric cars. If that dream becomes reality, then Musk’s paycheck will be seen as a worthy reward.
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