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Wall Street banks expect Tesla’s vehicle sales to grow much more slowly this year than its boss Elon Musk has forecast, as Donald Trump seeks to dismantle Biden-era climate policies that favour electric vehicles.
Tesla is poised to sell 2.07mn vehicles this year, up 16 per cent on 2024, according to analyst forecasts compiled by FactSet. That would be a rebound from last year, when the group reported its first drop since 2011, but it is well below the 20 to 30 per cent Musk projected in October and below the previous two years’ annual growth rate of about 40 per cent.
The figures underscore the challenge Tesla faces from Trump’s pledge to roll back policies that have boosted US EV sales, even as the two men’s closeness in the run-up to the president’s inauguration led to Musk being dubbed the “first buddy”.
Last week, an executive order said the White House would consider “the elimination of unfair subsidies and other ill-conceived government-imposed market distortions”.
“Trump 2.0 opposition to EV incentives has hit 2025 volume expectations,” said Morgan Stanley analyst Adam Jonas.
Trump has maintained his position on EVs despite his relationship with Musk, who has been appointed to lead his new Department of Government Efficiency, or Doge, initiative.
Tesla, which reports fourth-quarter earnings on Wednesday, would be hit particularly hard if Trump scrapped a $7,500 tax credit for EV buyers. Barclays analyst Dan Levy estimated that about two-thirds of Tesla’s US sales benefit from the credits.
The changes to EV subsidies are likely to take effect from 2026; some analysts said that Tesla’s sales figures may be boosted by buyers rushing to complete sales before then. Levy predicted “a significant EV pre-buy” in the second half of 2025 before volumes drop the following year; other analysts thought that pre-buys were already boosting Tesla’s sales.
Some analysts questioned how big the pre-buy would be; BNP Paribas Exane estimates volume growth this year could be as low as 12 per cent.
Tesla investors are also concerned about wider “pressures on the EV market, China competition [and] decelerating Cybertruck volumes”, said Jonas.
Overall US EV sales growth slowed last year due to high pricing and lack of new models; the EV market share was 8 per cent, compared with 7.6 per cent in 2023.
Meanwhile Trump’s trade policy towards China could exacerbate tensions with Tesla’s second-largest market.
Musk’s vociferous support of Trump and interventions in British, Italian and German politics may also have turned off some potential customers. Tesla’s EU sales of EVs fell 13 per cent year-on-year in 2024, according to Acea, the European car industry body.
Ginny Buckley, founder of Electrifying.com, an EV buying advice site, said: “Tesla was a market leader, and still is in many ways, but people are getting turned off.”
Tesla’s ageing portfolio is another cause for investors’ concern. The only new model it has released since the Model Y sport utility vehicle in 2020 is the Cybertruck, which starts at $82,000 and is selling between 9,000 and 12,000 units a quarter.
This year Tesla is revamping the Model Y, but last year it scrapped plans for a new $25,000 vehicle dubbed Model 2 in public and known as NV91 internally. Musk has been vague about plans for a successor to NV91, leading some analysts to speculate that it might announce a “Model 2.5” this year.
The company has hinted to investors that the new model may come in the second half of this year; many anticipate that further details may emerge this week.
Musk has previously predicted that overall Tesla sales could in future top 20mn a year. But even with a new affordable offering, Tom Narayan, an analyst at RBC Capital Markets, said this was unlikely. He expects Tesla could eventually achieve yearly sales of 6mn at most.
Despite the risk of stuttering sales growth, analysts said that Tesla’s future looks bright — thanks to its pivot into artificial intelligence. Musk is gambling that advances in AI technology have made it feasible to build a fleet of autonomous “robotaxis”.
“Selling cars is a tiny piece of that,” Narayan said, adding Tesla’s new revenue stream will come from semi-autonomous driving software.
Tesla is also building a humanoid robot that Musk has said will be “biggest product ever of any kind” and should propel the company to a valuation of $25tn, from its $1.3tn market capitalisation today.
“A ‘regulatory friendly’ Trump White House helps unlock value to Tesla’s stock as the autonomous [car] timeline is likely accelerated,” said Wedbush analyst Daniel Ives.
“There will be an anti-EV focus around emissions standards and removing $7,500 tax credits” but that will be counterbalanced by “focus on AI innovation, which provides very favourable tailwinds”, he said.
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