Automaker Ford Motor Company (F) just sent a worrying signal for the electric vehicle (EV) industry. The company reported a 0.9% drop in U.S. unit sales in November, and while its internal combustion line grew 2.2%, that strength couldn’t offset a surprising 61% drop in all-electric vehicle sales, a decline that accelerates the decline already seen in October.
Ford leadership had already anticipated these consequences, with the expiration of the $7,500 federal electric vehicle tax credit in October driving many consumers away from electric vehicles and creating a demand shock, at least for now. Furthermore, Ford’s latest EV numbers were not only disappointing, they were a blaring warning siren for the entire EV ecosystem.
Such a sharp collapse reinforces concerns that EV momentum is slowing just as competition intensifies. And while Ford now dominates the headlines, the fallout could also hit EV leader Tesla (TSLA) harder, especially as Tesla already faces pressure in key global markets. So, with sentiment turning cautious and demand signals looking shaky, it’s worth taking a closer look at TSLA stock now.
Founded in 2003 by a group of engineers determined to prove that electric vehicles could outperform gasoline-powered cars, Tesla has transformed from a Silicon Valley startup to one of the most influential companies in the world. Under the leadership of CEO Elon Musk, the brand reshaped the automotive industry with high-performance electric vehicles and a bold vision for the future.
Today, Tesla’s ambitions go far beyond cars, encompassing autonomous driving, artificial intelligence (AI)-powered robotics, and energy infrastructure, including grid-scale battery technology. With a market capitalization hovering around $1.4 trillion, Tesla sits firmly among the elite group of the “Magnificent Seven.”
And while its line of electric vehicles continues to drive the majority of brand recognition, much of Tesla’s long-term story is tied to big bets on the autonomous Cybercab robotaxi and the Optimus humanoid robot. Investors see them as potential blockbuster products, which could eventually generate more revenue than Tesla’s entire automotive business. Musk has even suggested that they could one day help Tesla become the most valuable company in the world.
However, despite all the rumors, Tesla’s momentum has cooled noticeably this year. A combination of intensifying competition, a slowdown in the core electric vehicle market and a growing investor preference for long-term bets on AI and robotics have weighed on sentiment. Macroeconomic pressures from tariffs and a potential economic slowdown, as well as price battles in global markets, have added more stress.
Additionally, the company is in the spotlight due to scrutiny over Musk’s massive $1 billion compensation package. All of this has translated into relatively subdued stock performance in 2025. Tesla shares are up just 10.52% year-to-date (YTD), well behind the 16.46% return of the broader S&P 500 Index ($SPX) over the same stretch. In fact, TSLA stock is currently the weakest performer in the Magnificent Seven group in 2025.
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Tesla’s fiscal 2025 third-quarter results, released in late October, delivered a mixed but intriguing update for investors. The headline figure was revenue, which rose 12% year over year (YOY) to $28.1 billion, easily beating Wall Street’s estimate of $26.6 billion. Notably, this was the first quarter of the year in which Tesla posted sales growth through 2024. A big boost came from U.S. customers who rushed to take advantage of the $7,500 federal EV tax credit before it expired, creating a last-minute surge in demand that helped boost overall sales.
That rush helped Tesla’s core automotive segment rebound, with revenue up 6% year-over-year to $21.2 billion. The energy business, however, once again attracted attention. Tesla’s energy storage division generated a 44% annual increase in revenue to $3.4 billion, driven by rapid adoption of its advanced battery systems. This segment has repeatedly posted double-digit gains, reinforcing its role as one of Tesla’s fastest-growing and most resilient businesses.
But beneath the strong top-line results, the margin picture told a more difficult story. Tesla continued to cut prices to keep up with fierce global competition, and profitability suffered. Gross margin fell to 18%, down from 19.8% last year, while operating margin fell 501 basis points to 5.8%. Adjusted EPS fell 31% year over year to $0.50, about 10.5% below analyst expectations, underscoring the pressure Tesla is under to defend its market share.
Looking to the future, Tesla is doubling down on its most ambitious projects. The company is targeting 2026 for “volume production” of the long-awaited Cybercab robotaxi, its heavy-duty semi-trailer and the next-generation Megapack 3 energy storage system. At the same time, Tesla is ramping up the first manufacturing lines for its humanoid robot Optimus, a sign that the company’s long-promised shift from automaker to robotics and artificial intelligence powerhouse is getting closer to reality.
Ford’s 61% drop in electric vehicle sales isn’t just a Ford problem. It’s a flashing red warning for other industry players, including Tesla. When a major automaker sees demand for electricity collapse immediately following the expiration of the $7,500 federal tax credit, it suggests that a significant portion of EV buyers remain highly price-sensitive and their purchasing decisions may change overnight when incentives disappear.
In early October, Tesla reported record third-quarter deliveries of 497,099 vehicles on total production of 447,450 vehicles. That increase was largely driven by a last-minute rush of American buyers trying to get the same federal tax credit before it ended. In other words, the third quarter strength was driven by a temporary tailwind that will not be available in the coming quarters.
And even with record deliveries, the financials revealed cracks. Profitability weakened as aggressive price cuts, growing competition and a softer global backdrop for electric vehicles squeezed margins. That leaves Tesla exposed if industry-wide demand continues to cool, especially as its rivals launch cheaper electric and hybrid vehicles at scale. With these pressures mounting, it might be prudent for investors to keep a close eye on Tesla now, as the post-incentive outlook could be very different from the rise seen in the third quarter.
Even Wall Street seems unsure about where Tesla will go next. The stock has a consensus rating of “Hold,” highlighting the divide among analysts. Of the 41 analysts covering TSLA, 14 are firmly in the “Strong Buy” camp, two call it a “Moderate Buy,” 16 prefer to wait on the sidelines with a “Hold,” and nine have even gone so far as to issue a “Strong Sell.”
Tesla is already trading above its average price target of $385.69. Still, the advantages are not ruled out. Wall Street’s most optimistic analysts see a path toward $600, which would mean roughly a 34% upside from current levels if Tesla can deliver on its ambitious roadmap.
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On the date of publication, Anushka Mukherji had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
