Wall Street banks anticipate that Tesla’s vehicle sales will increase at a much slower pace this year compared to the projections made by CEO Elon Musk. Reports suggest that Tesla is expected to sell approximately 2.07 million vehicles in 2024, representing a growth of 16 percent from the previous year. This marks a recovery from a decline in sales reported last year, the first drop since 2011, but falls short of Musk’s earlier estimates of 20 to 30 percent growth and is significantly lower than the annual growth rate of about 40 percent seen in the previous two years.
The outlook for Tesla is complicated by Donald Trump’s commitment to dismantle climate policies implemented during the Biden administration that have favored electric vehicle sales. An executive order announced recently indicated that the White House is considering the removal of certain subsidies and market interventions related to EVs. Analysts, such as Adam Jonas from Morgan Stanley, have pointed out that Trump’s stance against EV incentives may negatively impact Tesla’s expected volume for 2025.
Despite Musk’s appointed role in Trump’s new initiative focused on government efficiency, Trump has remained steadfast in his views towards electric vehicles. If Trump were to eliminate a $7,500 tax credit for EV buyers, this would significantly affect Tesla, as an estimated two-thirds of the company’s U.S. sales take advantage of these incentives.
Changes regarding EV subsidies are projected to be implemented in 2026, causing some analysts to predict an increase in sales as consumers rush to purchase vehicles before the deadline. Barclays analyst Dan Levy predicts a substantial pre-buying surge in the latter half of 2025, although other analysts are uncertain about the magnitude of this anticipated rush.
Tesla is also facing broader challenges, including market pressures, competition from China, and slowing demand for its Cybertruck model. Overall EV sales growth in the U.S. slowed last year due to high prices and the absence of new vehicle models, with the market share creeping up to 8 percent from 7.6 percent in 2023.
Trump’s trade policies could further strain relations with China, which represents Tesla’s second-largest market. Additionally, Musk’s vocal support for Trump, along with his involvement in various international political matters, may have alienated some customers. Tesla reported a 13 percent year-on-year decline in EV sales in the European market in 2024.
Concerns among investors are heightened by Tesla’s aging vehicle lineup; the last new model released was the Model Y in 2020, with the Cybertruck only accounting for quarterly sales of between 9,000 and 12,000 units. Although Tesla plans to refresh the Model Y this year, it previously abandoned plans for a new lower-cost model known as Model 2. There are expectations regarding the introduction of a new model later this year, with more details anticipated soon.
While Musk has suggested that Tesla sales could eventually surpass 20 million per year, analysts like Tom Narayan at RBC Capital Markets express skepticism, estimating a maximum of 6 million sales annually.
Despite potential challenges ahead, analysts believe Tesla’s future could be promising due to its shift towards artificial intelligence. Musk is optimistic that advancements in AI could facilitate the creation of a fleet of autonomous “robotaxis,” with sales of vehicles becoming a secondary source of revenue. Tesla is also developing a humanoid robot, which Musk claims could significantly enhance the company’s valuation.
With a potential Trump administration focused on regulatory changes that could aid Tesla’s stock, analysts suggest that while there may be setbacks regarding EV incentives and emissions standards, the push for innovation in AI could provide substantial growth opportunities.
photo credit: www.ft.com
