Tesla’s stock is on a ride so wild it could make Bitcoin blush. The company’s valuation sits at $1.4 trillion, placing it as the eighth most valuable business in the world. That’s higher than most countries’ GDP. But here’s the thing: Tesla’s forward price-to-earnings (P/E) ratio is 131.7. The S&P 500’s average? A mere 21.6.
Analysts say to justify this nosebleed-level valuation in 2025, Tesla needs more than buzzwords and Elon Musk’s Twitter antics. It has to deliver actual results, starting with its long-touted robotaxi ambitions. Oh, and let’s not forget about its bread-and-butter business of selling EVs, which is under pressure like never before.
Robotaxis or bust
Tesla’s future rides on its ability to pull off the ultimate flex: a fleet of fully autonomous robotaxis. Elon gave the world a peek at Tesla’s robotaxi concept at the “We Robot” event in October, but it was more of a teaser trailer than blockbuster debut.
The demonstration happened on Tesla’s own campus, and nobody knows if these cars can handle the real world—or just Tesla’s backyard.
Stephen Gengaro from Stifel, though, sees hope. With Donald Trump back in the Oval Office, deregulation could smooth the path for Tesla’s self-driving tech. He said, “The reaction in the stock since the election is really coming out of this easier path to regulatory approvals and getting full, unsupervised [FSD] approved.”
EV sales under pressure
While Tesla’s stock flies high, its core EV business is feeling the heat. EV sales grew just 3.1% in the first nine months of 2024. For context, Tesla’s growth was 51.4% in 2022. That’s a nosedive. Analysts are still hopeful for an 18% rebound in 2025, but the road ahead is rocky.
The Trump administration’s plan to cut the $7,500 federal EV tax credit isn’t helping. Goldman Sachs says scrapping the credit could stall U.S. EV demand until 2040. The company expects EVs to make up 8.5% of new vehicle sales in 2025—down from earlier estimates of 9%.
But there’s a twist. Deutsche Bank thinks the incoming tax credit repeal could trigger a short-term buying frenzy as customers rush to cash in before it’s gone. Deutsche Bank analysts wrote, “We could potentially see a near-term pull-forward in EV purchases ahead of the elimination.”
The longer-term outlook is less rosy. Tesla’s competitors, like Ford and General Motors, rely heavily on those credits to stay competitive. Elon himself admitted that while losing the credit hurts Tesla, it hits legacy automakers even harder.
Tesla’s global growth story hinges on China. Deutsche Bank estimates Tesla will deliver about 510,000 vehicles in Q4, with the majority coming from its Chinese operations. But to hit year-over-year growth targets, Tesla would need to deliver 515,000 units—a shortfall that could keep investors on edge.
China is also a manufacturing powerhouse. Any hiccup in Tesla’s Chinese operations could ripple through its global supply chain and revenue streams.
Elon’s Trump card
Elon’s cozy relationship with Trump is proving to be Tesla’s secret weapon. Elon has been appointed co-leader of the Department of Government Efficiency, aka “DOGE”—yes, it’s a nod to the memecoin. The Trump administration is reportedly considering scrapping certain car-crash reporting requirements, a move Elon has long pushed for.
This partnership isn’t just about cutting red tape. Elon donated $277 million to Trump’s campaign, cementing their alliance. If this bromance holds, Tesla could benefit from policies that fast-track its robotaxi and FSD goals.
But it’s a double-edged sword. Policies like tariffs on imports from China, Mexico, and Canada could hurt Tesla’s bottom line.
Even with all these tailwinds, Tesla’s valuation looks bloated. Goldman Sachs has a price target of $345 per share, 21% below its current level. Nearly half of analysts surveyed by FactSet rate the stock as a “buy,” but 30% remain neutral.
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