Tesla's journey in 2025 has been a rollercoaster of challenges and opportunities, with the company's flagship Model Y at the center of attention. While Tesla's stock has recently surged, the company faces significant headwinds in vehicle deliveries, particularly with its recently revamped Model Y.
Delivery Projections Raise Concerns
Market sentiment suggests Tesla might experience a substantial decline in deliveries for the current quarter. According to bets on the Kalshi platform, Tesla is expected to deliver only 355,000 electric vehicles in Q2 2025, representing a potential 20% year-over-year decline compared to the 443,956 units delivered in Q2 2024. This projection comes after Tesla delivered 336,681 units in Q1 2025, with production at 362,615 units. CEO Elon Musk previously attributed the deceleration in sales momentum to factory retooling for the new Model Y.
Tesla Q1 2025 Performance:
- Deliveries: 336,681 units
- Production: 362,615 units
Q2 2025 Projections:
- Expected deliveries: 355,000 units
- Year-over-year change: -20% (compared to 443,956 units in Q2 2024)
Recent Stock Performance:
- 5-day increase: ~20%
- 30-day increase: ~32%
- Current P/E ratio: 170x consensus 2025 earnings
Promotional Strategies to Boost Sales
In response to sluggish demand, Tesla has implemented aggressive promotional strategies for the Model Y. The company is now offering zero percent financing options to stimulate sales of the recently revamped model. These incentives, coupled with unusually short delivery lead times, suggest that demand may not be meeting expectations despite the vehicle's refresh. The situation appears particularly challenging in European markets, where sales in Germany reportedly declined by over 60%, according to Reuters data.
Stock Performance Defies Delivery Concerns
Despite delivery challenges, Tesla's stock has surged approximately 20% over the past five trading days and gained around 32% over the past month. This rally can be attributed to several factors, including Elon Musk's renewed focus on Tesla operations and the easing of U.S.-China trade tensions. After dedicating significant time to his role in the Department of Government Efficiency (DOGE), Musk has indicated he would scale back to spending just one to two days per week on government projects while dedicating more time to Tesla.
Trade Relations Improvement
The thawing of U.S.-China trade tensions has provided a positive backdrop for Tesla's operations. U.S. tariffs on Chinese goods have been reduced to 30% for a 90-day period, while Chinese tariffs on U.S. goods have decreased from 125% to 10%. Although Tesla manufactures most vehicles sold in China at its Shanghai plant, lower tariffs could reduce the cost of imported components used in U.S. manufacturing operations and minimize the risk of future retaliatory measures affecting its Chinese operations.
Competitive Positioning Amid Auto Tariffs
Tesla may benefit from the 25% tariff on imported passenger vehicles and light trucks that has been in place since early April 2025. Unlike some competitors who manufacture EVs in Mexico, Tesla builds all vehicles sold in the U.S. at factories in California and Texas, potentially giving it a pricing advantage as the full effect of tariffs is felt in the American market.
Future Growth Strategies
Tesla's strategy for reversing its sales decline includes plans to launch more affordable versions of its existing models, though these may come with reduced features and potentially lower margins. The company's most significant bet remains on autonomy, with plans to launch unsupervised Full Self-Driving (FSD) on the Model Y in Austin, Texas this June. By the end of 2025, Tesla intends to expand this service to multiple U.S. cities and begin operating between 10 and 20 robotaxis in Austin.
Valuation Concerns
Despite the recent stock rally, Tesla's valuation remains a concern for some investors. The stock trades at approximately 170 times consensus 2025 earnings, a premium that may be difficult to justify given the current challenges in vehicle demand. The company faces increasing competition in the EV market, particularly from Chinese manufacturers who are gaining ground internationally, while also contending with issues related to brand image and declining resale values in the U.S. market.