Wall Street is quietly retreating from its enthusiasm for Tesla's self-driving car plans

• Tesla has dramatically improved its car business and last week posted an impressive, profitable quarter that beat Wall Street expectations.
• Tesla's business is now good.
• But it's an electric-car business, and the transportation-of-the-future narrative has shifted to self-driving cars.
• Tesla is working on an autonomous solution, but the likes of Waymo and Cruise are far ahead.
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The year 2019 was a pivot in the story about the future of cars.

From about 2010 until 2016, electric vehicles ruled the narrative, and Tesla captured most of the plot points.

But then, suddenly, there was a massive shift. Alphabet launched Waymo, its self-driving service that had been known as the Google Car project, and General Motors bought a San Francisco startup, Cruise Automation, and began the process of transforming it into a $20-billion standalone autonomous-mobility business.

Tesla CEO Elon Musk is preternaturally attuned to the Next Big Thing, so he rapidly recast Tesla as a self-driving leader and unleashed the somewhat not-ready-for-prime-time Autopilot driver-assist system on the world. Autopilot is a very effective version of advanced cruise control, but having tested it many times, I can say without reservation that self-driving it ain't.

Musk knows this, but he's determined to will Autopilot into being Tesla's Waymo or Cruise.

Remarkably, it could work. Tesla has quietly been developing a visually-based autonomous technology (Waymo and Cruise rely on expensive laser-radars) that, if it pans out, could be a game-changer.

Emphasis on "could."

Tesla lags the leaders on self-driving business models

The challenge for Tesla is that despite its current, almost comically elevated market capitalization - it's surged from less than $50 billion to more than $100 billion in ... four months? - what we have here fundamentally is a carmaker, not an autonomous ride-hailing or car-sharing business. What we once referred to as the "Tesla Network" morphed into a Musk-promised robotaxi concept that frankly seems like a bridge too far for a company that just hit a yearly sales level that's about what a major automaker achieves in a few months.

Musk is the most important entrepreneur in the car business since Henry Ford, but Henry didn't have to contend with a 24/7 hype cycle around allegedly transformational technologies, nor was he much of buzz-surfer (though he appreciated the value of PR - he secured funding for the Ford Motor Company by winning a car race).

Musk doesn't mind surfing the buzz. But despite the 90-degree inflection of Tesla stock chart since last October, Wall Street is starting to wonder if Autopilot can really advance to being a technological and business-model competitor to the leaders at the moment.

Tesla bull Adam Jonas of Morgan Stanley published a research note after Tesla posted Street-beating fourth-quarter earnings numbers last week, affirming his seemingly low price target of $360 per share and indicating that Tesla's failure to make the leap to "shared mobility" is a risk that could consign the company to "niche" status.

Wall Street has reason to worry. As Jonas also pointed out, Tesla could now be a "profitable and cash generative tech company," another way of saying that Tesla has finally figured out how to sustain a viable business.

Tesla is fundamentally a carmaker

The "tech" part is debatable. Tesla is, fundamentally, a carmaker. And while carmakers can see some truly staggering amounts of cash flow through their operations, they also require equally staggering amounts of cash to run things. Ford enjoys a Tesla-grade year of revenue every quarter, yet hasn't been able to climb above a 10% net margin.

That could be Tesla's fate. On the ride-hailing/sharing side, however, autonomy promises to create much more lucrative opportunities. It's the business to bet on for the 2020s, much as Tesla was the electric car play in the 2010s, rising from less than $20 per share post-IPO to over $630 per share a decade on.

Obviously, it worth noting that although GM's market cap is stuck around $50 billion, in just three years it and other investors have created a $20 billion company in Cruise. Before fully-self-driving Teslas show up on the streets on San Francisco, Cruise could be racking up driverless rides in its vehicles.

I have an extremely high level of confidence that Tesla will leverage its EV business to book something like $30 billion in revenue in 2020 and make several billion in profit.

But it doesn't look as though the self-driving results will be as impressive. That's doesn't mean Tesla's approach isn't worthwhile - it could be the most innovative, when all's said and done. But it's going to be hard for Tesla to nurture two businesses at once.