Tesla’s Sales Outlook Weakens Despite Musk’s Optimism on Self-Driving

Tesla Inc. wrapped up last year with strong momentum in its stock, as investors leaned into Elon Musk’s upbeat vision for a future driven by autonomous vehicles. Convincing everyday car buyers, however, proved far more challenging.

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Shares of the world’s most valuable automaker surged in the second half of the year, fueled largely by Musk’s bold claims around advances in artificial intelligence and robotics. Yet those promises didn’t translate into stronger showroom traffic. Despite delivering a record number of vehicles in the third quarter, Tesla likely sold fewer cars in the final six months of the year compared with the same period a year earlier.

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When Tesla reports fourth-quarter results on Friday, it’s expected to announce deliveries of roughly 440,900 vehicles, an 11% drop from a year ago, based on Bloomberg-compiled estimates. In an unusual move, Tesla released its own average of analyst forecasts earlier this week and the company’s numbers were even weaker, pointing to a 15% year-over-year decline.

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Wall Street’s outlook for Tesla’s longer-term growth has also dimmed. Two years ago, analysts expected the company to deliver more than 3 million vehicles annually by now. That forecast has since been slashed dramatically, with current estimates for this year sitting closer to 1.8 million units.

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“Tesla shareholders tend to focus on what the company could look like five, 10, or even 15 years from now, and they’re largely overlooking near-term performance,” said Garrett Nelson, an equity analyst at CFRA Research. “The real question is how long that mindset can hold, especially if financial headwinds become more visible.”

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Even by Tesla’s famously volatile standards, 2025 was a rocky year. Vehicle sales stumbled out of the gate, partly because Tesla paused production across its factories to retool assembly lines for an updated version of the Model Y, its top-selling vehicle. Adding to the pressure was growing backlash tied to Musk’s role within the administration of US President Donald Trump.

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By early April, as Musk publicly clashed with government officials over tariff policies, Tesla’s stock had fallen about 45% for the year. The tide began to turn when Musk stepped back from politics and refocused on one of his long-standing ambitions: launching a ride-hailing business built around vehicles he says will ultimately drive themselves.

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In June, Tesla rolled out an invite-only Robotaxi service in Austin, Texas. The program used Model Y vehicles staffed with safety operators to monitor each trip. Although the service drew scrutiny after reports of traffic violations on its first day prompting federal regulators to open multiple investigations into Tesla’s driving technology investors largely brushed aside those concerns.

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Momentum accelerated again in September, when Tesla’s board proposed a new compensation package for Musk that could be worth as much as $1 trillion if ambitious milestones are met, including deploying millions of robotaxis. Soon after, Tesla’s share price completed its comeback. By the time the stock hit a new all-time high on December 16, the company had added more than $915 billion in market value in just over eight months.

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While investors have embraced Tesla’s robotaxi narrative, consumers have been more hesitant. Musk has openly acknowledged the difficulty of persuading drivers to pay for Tesla’s Full Self-Driving software, which still requires constant human supervision. Compounding the issue, allegations that Tesla overstated its autonomous capabilities in California could result in the state temporarily suspending the company’s sales license early this year.

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Tesla’s strategy hasn’t fared much better overseas. In China’s fiercely competitive EV market, the company has struggled to differentiate its driver-assistance features, as rivals like BYD Co. and Xiaomi Corp. offer comparable systems as standard equipment. Analysts expect BYD buoyed by strong sales in China and growing traction in Europe, where Tesla has yet to secure regulatory approval for FSD to outsell Tesla in battery-electric vehicles globally for a fifth straight quarter.

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Following what is expected to be its second consecutive annual decline in vehicle sales, Tesla faces additional challenges in 2026. The US has eliminated federal tax credits for EV purchases and leases, a move Musk has warned could lead to “a few rough quarters.”

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Some industry observers see opportunity amid the policy pullback. As government support fades, several legacy automakers are scaling back EV investments. Ford Motor Co., for example, said last month it anticipates roughly $19.5 billion in charges tied to canceled EV and battery projects deemed unprofitable.

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Musk closed out the year by teasing excitement around the Cybercab, a compact two-seat vehicle with distinctive butterfly doors. Although the prototype unveiled in late 2024 lacked a steering wheel and pedals, Tesla chair Robyn Denholm said regulators could require those features before the vehicle goes on sale.

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“Investors have fully bought into Elon’s autonomous vision, and the timing works because Tesla’s core EV business is likely to be flat to modestly higher next year,” said Gene Munster of Deepwater Asset Management. “At this stage, all Musk really needs is for vehicle sales to stabilize over the next year to keep investors satisfied.”

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