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Tesla is facing a difficult road as it hopes that robotaxis sales will offset declining sales

Tesla's CEO Elon Musk is walking a tightrope, as he navigates the company's declining electric car sales and an autonomous vehicle business that hasn't yet taken off. Musk stated on Wednesday's earnings conference that Tesla was "getting regulatory permission to launch" its robotaxis across several states including California, Nevada Arizona and Florida.

He anticipates that operations will reach "half of the U.S. population by the end the year", and roll out in full by the end next year. The company has only operated a small fleet of vehicles in Austin, Texas. These are not accessible to the public. Musk's call did not mention the difficulty of getting regulatory approvals in California.

Shawn Campbell of Camelthorn Investments, who is a Tesla shareholder, said that Tesla cannot afford to make a mistake with its robotaxi service. He said that the "wheels are coming off" Tesla's automotive business with sales declining in "almost all markets."

Musk's political activism and an aging product lineup contributed to a 13% drop in sales for the first six months of this year. Musk admitted that his company may have "a couple of rough quarters" with no affordable vehicles due until the end of the year, and the elimination of the $7,500 U.S. Tax Break for EV Buyers.

Ross Gerber is the CEO of Gerber Kawasaki Wealth and Investment Management and an investor in Tesla. "The numbers speak for themselves," he said. "They are bad for a company that isn't expanding."

Tesla's shares have already fallen by nearly 18% in the past year, and robotaxiss and autonomous driving is critical to maintaining its roughly $1 trillion valuation on the stock market.

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Musk's robotaxi promises are now being scrutinized by investors more closely due to the decline in auto sales. The Cybertruck and other products have been delayed, but Musk has said every year since 2016, that Teslas with driverless technology would be available the following year. On Wednesday's conference call, many questions focused on the speed at which Tesla will be able expand its robotaxi service and on regulatory obstacles that still remain. Musk predicted that the robotaxi service would have "material" impact on Tesla's revenue by the end next year. Musk said in April that the robotaxi business would have a "material impact" on Tesla's business by the end of next year. He also predicted that "millions of Teslas will be operating autonomously by the second half 2026."

Musk had listed the San Francisco Bay Area as his first expansion market, but California regulators said on Wednesday that Tesla has not yet submitted permits to allow it to pick up passengers and charge them for rides in fully automated vehicles.

In order to test or deploy autonomous vehicles, companies must obtain a number of permits from the California Department of Motor Vehicles.

Tesla has only obtained one of the many permits required to launch a new service. Both agencies have confirmed that the company hasn't applied for any additional permits to test or operate autonomous vehicles.

Tesla did not immediately respond to a comment request. California does not have a specific time frame for granting such permits. However, Alphabet’s Waymo which provides autonomous ride-hailing services in Los Angeles, the Bay Area and San Francisco, has logged over 13 million test miles and received seven different regulatory approvals during nine years.

Tesla has only logged 562 miles (904 kms) of testing in California since 2016. According to the latest state records, Tesla hasn't reported any autonomous driving miles to the state for six years.

Paul Miller, principal consultant at Forrester market research and consulting firm, highlighted Musk's statement about "subject to approvals by regulatory agencies" when addressing the half of U.S. citizens.

He said, "This caveat is important because regulatory approvals can take a long time."

Musk also mentioned that other markets could move more quickly. A spokesperson for the Arizona Department of Transportation said that Tesla had contacted officials in Arizona last month to apply for permits to operate autonomous vehicles, both with and without safety drivers.

The agency has said that a decision will be made at the end this month. Tesla must also apply for permits to operate a ride hailing service and submit to the state plans on how to deal with its autonomous vehicles.

Nevada DMV officials stated that they had discussed the state process with Tesla in the past week but no action has been taken. Officials in Florida have not responded to a comment request.

Investors are also interested in knowing more about the Austin launch.

Gene Munster is the managing partner of Deepwater Asset Management and a Tesla shareholder. He was disappointed that the EV manufacturer did not provide any updates during its earnings call about when the Austin service will be available to the public or the number of vehicles on the road.

Munster stated that it seemed as though he was trying to avoid giving any hard numbers about how the situation would play out. Reporting by Chris Kirkham, Akash Sriram and Abhirup in San Francisco. Editing by Peter Henderson & Jamie Freed.

(source: Reuters)