Wall Street banks expect Tesla's car sales to grow much slower this year than co-founder Elon Musk's forecasts, as Donald Trump seeks to undo Biden-era climate policies that favor electric vehicles.
Analyst forecasts compiled by FactSet show Tesla is expected to sell 2.07 million vehicles this year, a 16% increase from 2024. That would be a rebound from last year, when the group reported its first decline since 2011, but well below the 20% to 30% forecast by Musk in October and below the roughly 40% annual growth seen in the previous two years. .
The data underscores the challenge Tesla faces as Trump pledges to roll back policies that boost U.S. electric car sales. An executive order last week said the White House would consider "eliminating unfair subsidies and other ill-conceived government-imposed market distortions."
Morgan Stanley analyst Adam Jonas said: "Trump 2.0's opposition to EV incentives has hit 2025 sales expectations."
Tesla, which reports fourth-quarter earnings on Wednesday, will be particularly hard hit if Trump eliminates a $7,500 tax credit for electric car buyers. Barclays analyst Dan Levy estimates that about two-thirds of Tesla's U.S. sales benefit from these points.
Changes to electric vehicle subsidies may take effect from 2026; analysts say Tesla's sales numbers may be boosted by buyers completing sales before then. Levy predicts a significant increase in EV pre-orders in the second half of 2025, followed by a decline in sales the following year; other analysts believe pre-orders have already boosted Tesla sales.
Some analysts question the scale of pre-orders; BNP Paribas Exane estimates sales growth this year could be as low as 12%.
Tesla investors are also concerned about "increased pressure on the electric vehicle market, competition from China (and) declining Cybertruck sales," Jonas said.
Overall U.S. electric vehicle sales growth slowed last year due to high pricing and a lack of new models; electric vehicle market share was 8%, compared with 7.6% in 2023.
At the same time, Trump's trade policies toward China are likely to exacerbate tensions with Tesla's second-largest market.
Musk's strong support for Trump and meddling in politics in Britain, Italy and Germany may also put off some potential customers. According to data from European automotive industry body Acea, Tesla's electric vehicle sales in the EU will fall by 13% year-on-year in 2024.
"Tesla used to be the market leader and in many ways still is, but people are losing interest," said Ginny Buckley, founder of Electrifying.com, an electric car buying advice website.
Tesla's aging portfolio is another reason for investor concern. The only new model the company has released since the 2020 Model Y sport utility vehicle is the Cybertruck, which starts at $82,000 and sells between 9,000 and 12,000 units per quarter.
This year, Tesla is revamping the Model Y, but last year it canceled plans for a new $25,000 car, known publicly as the Model 2 and internally as the NV91. Musk has been vague about plans for a successor to the NV91, leading some analysts to speculate that the company could launch a "Model 2.5" this year.
The company has hinted to investors that the new model could launch in the second half of this year; many expect more details could be revealed this week.
Musk has previously predicted that Tesla's overall future sales may reach 20 million vehicles per year. But RBC Capital Markets analyst Tom Narayan said that's unlikely to happen even with new affordable products. He expects Tesla to eventually achieve annual sales of up to 6 million vehicles.
Despite the risk of stalling sales growth, analysts say Tesla's future looks bright -- thanks to its shift to artificial intelligence. Musk believes that advances in artificial intelligence technology make it possible to build a fleet of autonomous "robot taxis."
"Selling cars is just a small part of it," Narayan said, adding that Tesla's new revenue stream would come from semi-autonomous driving software.
Tesla is also building a humanoid robot, which Musk said will be the "biggest product ever" and will push the company's valuation to $25 trillion from the current $1.3 trillion.
"A 'regulator-friendly' Trump administration could help unlock value in Tesla stock as autonomous (car) timelines are likely to accelerate," Wedbush analyst Daniel Ives said.
He said the "anti-EV focus will be around emissions standards and the removal of the $7,500 tax credit" but this will be offset by "a focus on artificial intelligence innovation, which provides a very favorable tailwind".