Electric vehicle (EV) and tech giant Tesla TSLA released its second-quarter 2025 production and delivery numbers yesterday. It produced 410,244 vehicles, down on a yearly basis. Deliveries totaled 384,122 units (373,728 Model 3/Y and 10,394 Other Models), down 13.4% year over year. The deliveries also fell short of Wall Street’s consensus mark of 390,000 units. Despite the miss, shares of Tesla were up roughly 5%, closing the session at $315.65 yesterday.
Tesla’s EV business is under pressure. In the first quarter of 2025, Tesla attributed weak deliveries to production disruption associated with the Model Y changeover. However, this doesn’t hold true for the second quarter as the new Model Y has been ramped up across factories. In fact, Tesla is producing more and building up inventories, which clearly indicates a demand problem.
And this demand problem is not industry-wide. While Tesla’s sales declined, General Motors’ GM EV sales more than doubled in the second quarter to 46,280 units. China’s EV behemoth BYD Co Ltd BYDDY sold 606,993 units, which increased 42.5% year over year.
Clearly, Tesla’s brand image is not the same as before. The company’s aging model lineup and CEO Elon Musk’s increasingly polarizing image have been hurting the company’s sales amid cut-throat competition.
Amid falling EV demand, Tesla’s energy and storage business is thriving, thanks to the strong reception of its Megapack and Powerwall products. Last year, deployments soared 113% year over year, driven largely by the expansion efforts at the Mega factory in Lathrop, CA. In the second quarter of 2025, Tesla deployed 9.6 GWh of energy storage, up from 9.4 GWh in the year-ago quarter. The company expects deployments in 2025 to increase another 50% at least. Notably, this segment carries the highest margins across Tesla’s business lines. However, being a small contributor to overall revenues, its strength isn’t enough to offset the ongoing weakness in the EV segment.
Tesla’s Supercharger network has also become a critical component of the company’s ecosystem. The rollout of the North American Charging Standard has bolstered Tesla’s position, allowing various automakers to access its charging network.Worldwide, Tesla has more than 70,000 Superchargers, making it the largest EV charging network globally.
Tesla is banking on self-driving technology to drive its next wave of growth. The company recently launched robotaxi services in Austin and completed a fully autonomous Model Y delivery, with no driver and no remote guidance. Musk envisions robotaxis as a game-changing revenue stream amid rising EV competition.
But despite the bold push, Tesla trails leaders like Waymo in the autonomous vehicle race. As with many of Tesla’s ambitious promises, investors should temper expectations. Regulatory hurdles, safety concerns and the technical complexity of full autonomy remain significant obstacles that could delay large-scale deployment and profitability.
Year to date, shares of Tesla have declined 22%, handily underperforming peers like General Motors and BYD. While General Motors’ shares lost a modest 1%, BYD gained more than 37% during the same timeframe.
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Tesla’s valuation remains stretched. Going by its price/sales ratio, the company is trading at a forward sales multiple of 9.64, way higher than General Motors and BYD.
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This premium is difficult to justify based on fundamentals. The market seems to be pricing in major breakthroughs in high-risk frontiers like autonomous driving and humanoid robotics—bets that are far from guaranteed to pay off.
The Zacks Consensus Estimate for Tesla’s 2025 sales and earnings implies a year-over-year decline of 2% and 22%, respectively. The EPS estimate for Tesla has been trending southbound over the past 90 days.
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Tesla has been a big winner over the past decade, but its recent performance tells a different story. Delivery shortfalls, margin pressure, and increasing competition are taking a toll. Add to that Musk’s controversies with U.S. President Trump, and it’s no surprise that investor sentiment is wavering.
Downward revisions in earnings estimates and growing volatility paint a challenging near-term outlook. While Tesla still has long-term potential, particularly in areas like energy and autonomy, the risks currently outweigh the rewards.
Until Tesla shows real progress on both the tech and execution front, investors may be better off staying on the sidelines—or even locking in any profits if they haven’t already.
Tesla currently carries a Zacks Rank #5 (Strong Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
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This article originally published on Zacks Investment Research (zacks.com).