As a dedicated follower of my FIRE journey, I regularly assess my investments, and Tesla holds a significant position in my portfolio. Naturally, any movement in Tesla’s stock price has a substantial impact on my overall returns. With recent developments at Tesla , I want to share my thoughts on whether I should continue holding, buy more, or sell.

Tesla recently held its long-awaited 10/10, which was initially set for 8/8 but was delayed. Investors were hoping for big announcements, particularly the unveiling of the highly anticipated Model 2, a lower-cost vehicle designed to compete with mass-market sedans like Toyota and Honda. The current Tesla lineup—Model 3 and Model Y—competes at a higher price point, more akin to brands like BMW and Mercedes.

Wall Street analysts are highly focused on Tesla’s potential low-cost vehicle, as it is seen as a critical driver of the company’s growth over the next 3 to 5 years. To determine Tesla’s intrinsic value, analysts typically use the discounted cash flow (DCF) method, projecting Tesla’s future earnings or free cash flow and then discounting those projections back to the present using a specific discount factor. However, most analysts limit their forecasts to the next 5 years because predicting Tesla’s performance beyond that becomes extremely challenging. As the time horizon extends to 10 or 20 years, not only do forecasts become less reliable, but the present value of those future earnings diminishes significantly due to the compounding discount factor.

Tesla’s ambitious plans, including the potential release of driverless RoboTaxis and a Tesla van, add further complexity to the analysts’ calculations. These innovations rely heavily on solving full self-driving (FSD), which has yet to be achieved. Many analysts remain unimpressed with Tesla’s progress on FSD, partly because Elon Musk has repeatedly promised it would be solved “soon,” but the timeline continues to be pushed back. For years, improvements in FSD have been marginal at best, and Musk’s overly optimistic projections have contributed to skepticism in the market.

This ongoing cycle—where optimism builds around Tesla events only to be followed by stock price declines when the actual details emerge—has become a familiar pattern for investors. Analysts find it difficult to factor future innovations like driverless vehicles into their models until there is more tangible progress on FSD.

Why I Continue to Hold Tesla: A Breakdown of My Convictions

Belief in Elon Musk’s Vision

Despite the doubts surrounding Tesla’s Full Self-Driving (FSD) technology, I continue to believe in Elon Musk’s vision. While he has missed deadlines repeatedly, many of his bold predictions eventually come true. Elon Musk may be late on timelines, but his ability to deliver on long-term promises has been proven time and time again. A prime example is SpaceX.

Recently, I watched the launch of Starship, where the booster successfully returned and was caught by the “chopstick” arms of the launch tower. This was a major milestone that demonstrated Musk’s ability to turn what once seemed impossible into reality. It showcased not only his innovative approach but also his world-class leadership in executing complex visions. This same leadership and first-principles thinking extend beyond SpaceX to Tesla’s long-term prospects. While Tesla may be delayed in delivering certain technologies, I believe the company will eventually fulfill its promises under Musk’s guidance.

Disruptive Technology: Lessons from The Innovator’s Dilemma

Another reason for my confidence in Tesla is rooted in what I learned from the book The Innovator’s Dilemma, which distinguishes between disruptive technologies and incremental technologies. Many legacy automakers today are focused on incremental improvements—enhancing the speed, range, or comfort of their vehicles. However, these sustaining innovations fail to truly compete with the disruptive potential of Tesla’s full self-driving technology, which I believe will define the future of transportation.

Beyond that, Tesla also takes a whole product solution approach, as described in Crossing the Chasm. Rather than focusing solely on individual improvements, Tesla is building an entire ecosystem—from electric vehicles and charging infrastructure to software like full self-driving. This comprehensive strategy positions Tesla well ahead of legacy automakers that still rely on incremental improvements without addressing the broader shift toward a fully integrated transportation solution.

In my view, the future is electric, and Tesla is leading the charge. The reason traditional automakers struggle to compete is that transitioning to electric vehicles requires a complete overhaul of their existing manufacturing technology and infrastructure. Building new factories dedicated to electric vehicles would severely impact their margins, making it difficult for them to pivot quickly. Additionally, promoting electric vehicles forces them to disrupt their own profitable legacy business models, which is akin to digging their own graves and makes their transition even more challenging.

Tesla’s Competitive Advantage

Looking ahead, if the future is truly electric—and I believe it is—Tesla is positioned to dominate. Tesla is on track to construct close to 2 million electric vehicles a year, a feat that no other automaker in the U.S. can achieve and generate positive free cash flow, with the possible exception of China’s BYD, which still focuses heavily on hybrids.

It’s important to note that building a car isn’t just about designing a prototype; execution is everything. Tesla’s ability to scale its production and maintain its branding over the years shows how far ahead it is compared to legacy automakers. Many traditional companies are years behind Tesla in terms of electric vehicle production and innovation. When electric vehicles become mainstream, Tesla will be uniquely positioned to capitalize on its early innovations and infrastructure.

Tesla’s Unique Leadership and Innovation Model

For many companies I invest in, there comes a point where they reach significant margins through sustaining innovation. At that stage, they often fail to continue disrupting themselves. This stagnation is usually due to two key reasons. First, managers become comfortable with making incremental improvements—enhancing the product or service just enough to show a modest improvement in gross margin year after year. This is how many justify their paychecks, delivering short-term improvements without pushing the boundaries of innovation. Second, these companies are content with their success in sustaining innovations and don’t see the need to disrupt their own processes.

Tesla, however, operates on an entirely different level of leadership. Rather than stopping at the success of their electric vehicles or even the development of full self-driving technology, Tesla continues to push forward with disruptive innovations, all while maintaining a clear and ambitious roadmap for the future.

Tesla’s first major growth curve came from scaling the Model 3, proving they could mass-produce electric vehicles on a large scale. The next major leap is solving Full Self-Driving, a challenge they are still working on. But what excites me most about Tesla is that they aren’t stopping there. Once FSD is fully operational and becomes mainstream, it will inevitably transition from a disruptive technology to a sustaining one. Tesla will need yet another major leap to continue growing—and that leap is already on the horizon: the human robot concept.

For an investor with a long-term view, Tesla is a compelling opportunity because it operates like a collection of startups rather than a traditional company. Each of these “startups” within Tesla is focused on disrupting a different aspect of technology or transportation, whether it’s electric vehicles, self-driving cars, or robotics. Tesla doesn’t just rest on its laurels; it continuously pushes to redefine what’s possible, giving it multiple growth curves in the future.

One of the aspects I admire about Tesla is how each division or team has the autonomy to innovate without being constrained by other parts of the company. This allows for a startup-like culture within each sector, enabling teams to pursue innovation without being bogged down by broader corporate concerns like immediate cash flow impacts. At the same time, Tesla remains disciplined in managing its expenses. Despite these disruptive efforts, they’ve maintained an operating expense of around $8 billion per year, demonstrating financial discipline even while innovating at such a rapid pace.

Acknowledging Tesla’s Current Challenges

While I remain confident in Tesla’s long-term potential, it’s important to recognise the challenges the company faces today. Firstly, Tesla is unlikely to deliver another 5x or 10x return in the next one to two years, primarily due to weaker sales in the U.S. Elon Musk’s growing involvement in the political sphere has also had an impact. His polarizing views have alienated some potential customers, with many on social media expressing discontent, even selling their Teslas or voicing negative opinions about the company. This highlights why many CEOs remain politically neutral—Tesla will undoubtedly face headwinds as a result of this dynamic.

Secondly, the absence of a Model 2, which would offer a more affordable vehicle, means Tesla lacks a clear catalyst for strong growth next year. While Musk has laid out an ambitious roadmap to produce 20 million vehicles in 10 years, this goal currently seems unattainable based on today’s standards. In fact, Musk has pivoted Tesla’s focus away from that target and is now concentrating on the success of Full Self-Driving.

The litmus test for Tesla’s valuation now hinges on whether FSD can be fully realized. Other potential growth areas—such as scaling the Tesla Semi, the Cybertruck, or even Tesla Energy—are already priced into Tesla’s rich valuation, which currently trades at around 60 times earnings with a stock price of approximately $218.

Conclusion: The Long-Term View with a Dollar Cost Averaging Approach

For these reasons, I continue to hold Tesla as my largest position, while maintaining a long-term perspective. I understand that Tesla may not deliver explosive returns in the near term, but my confidence in its disruptive technologies and long-term vision remains intact. Given the challenges I’ve outlined—weak U.S. sales, political headwinds, and the absence of a clear catalyst like the Model 2—I don’t feel the need to rush into buying more shares immediately.

In fact, just before the 10-10 event, I decided to sell a portion of my Tesla shares, following the principle of “buy on rumor, sell on news.” Tesla has a history of stock price declines after major announcements, so I took the opportunity to lock in some profits. However, I am now slowly repurchasing shares through my usual dollar cost averaging strategy. This approach allows me to build my position steadily without rushing, especially considering the headwinds Tesla faces in the near term.

Ultimately, Tesla remains a cornerstone of my portfolio, and I’m prepared to hold through the volatility, believing that the company’s disruptive growth will pay off in the years to come.