Tesla faces difficult road ahead as it hopes robotaxis will offset declining sales

LOS ANGELES, July 24 (Reuters) - Tesla (TSLA.O), opens new tab and its CEO Elon Musk are walking an increasingly difficult tightrope as the company navigates declining electric vehicle sales and an autonomous driving business that has yet to get off the ground. On Wednesday's earnings call, Musk said Tesla is "getting the regulatory permission to launch" robotaxis in several states, including California, Nevada, Arizona and Florida. 

He expects operations to reach "half the population of the U.S. by the end of the year" and to roll out at scale by the end of next year. So far, though, the company is operating only a small fleet in Austin, Texas, that is not available to the general public. And getting regulatory approvals, particularly in California, is likely to prove a bigger hurdle than Musk described on the call. 

"Tesla cannot afford a misstep with the robotaxi service," said Camelthorn Investments adviser Shawn Campbell, who owns Tesla shares. He added that "the wheels are coming off" its automotive business, with sales declines across "almost every market." Sales fell 13% for the first half of this year, as its core EV business deteriorated due to an aging lineup and brand damage from Musk's political activism.

With no affordable vehicles on the horizon until the last three months of the year and the upcoming elimination of a $7,500 U.S. tax break for EV buyers, Musk acknowledged that the company could have "a few rough quarters." 

 "The numbers kind of speak for themselves," said Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management and a Tesla investor. 

"They're bad for a growth company, which isn't growing." Tesla shares were down 6% in premarket trading on Thursday. They have declined nearly 18% this year and robotaxis and autonomous driving are critical to maintaining the company’s roughly $1 trillion stock-market valuation.