Analyst Explains Tesla's (TSLA) 'Big Question' and New Struggles

We recently published 10 Stocks to Watch Ahead of Q3 Earnings Season. Tesla Inc (NASDAQ:TSLA) is one of the stocks that Wall Street analysts are discussing these days.

Steve Westly, The Westly Group founder, said in a recent program on CNBC that Tesla Inc (NASDAQ:TSLA) Q3 delivery numbers might be solid, but the “big question” is about its Q4 performance. The analyst said Tesla Inc (NASDAQ:TSLA) is facing competition as other companies roll out electric vehicles.

“I think it’s a tale of two cities. Look, I think they’re going to post a solid Q3, 465,000 vehicles, about 25 billion for the year. They’re going to be a little up in China, down in Europe, and the US is going to be solid. Why? because everybody’s rushing to get a car before the September 30th deadline when the tax rebates go away. So the big question is how does Q4 look like when those rebates are gone. And the big picture is this. Every automaker in the world is going all electric. Why? The cost of batteries keep going down. But Tesla Inc (NASDAQ:TSLA) got to get new product into market. They’ve got to get lower cost product into market. They’ve got to open new markets. And they’ve got to prove they’re a technology company. They need more regulatory approvals to get that full self-driving going.”

  Image by Blomst from Pixabay Tesla posted strong delivery numbers for Q3 as customers scrambled to buy more EVs amid tariffs and the expiration of EV tax credits. However, this trend is not expected to be sustainable. Even if Elon Musk increases his focus to fix the company’s problems, it would take a lot of effort to come out of the demand crisis. For example, in California, the largest U.S. market for electric vehicle adoption and sales, Tesla sales fell about 12% year over year in 2024, causing its market share to drop from 60.1% in 2023 to 52.5% in 2024. Was it because Californians are buying fewer EVs? No. Californians purchased more than 2 million electric cars during the year, almost double when compared to the past two years.

Baron Focused Growth Fund stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its second quarter 2025 investor letter:

“Tesla, Inc. (NASDAQ:TSLA) designs, manufactures, and sells electric vehicles (EVs), solar products, and energy storage solutions, while also developing advanced real-world AI technologies. Despite ongoing macroeconomic challenges and regulatory complexities, shares climbed after Tesla completed a limited commercial rollout of its highly anticipated robotaxi business in Austin—following more than a decade of development and billions of dollars in investment. This milestone signals a potentially transformative shift in the automotive industry and opens up a sizable new market beyond the company’s core operations. Investor sentiment also improved after Elon Musk stepped back from government-related engagements, boosting confidence in Tesla’s near-term execution. Tesla introduced a refreshed Model Y globally, featuring design and performance upgrades, and outlined plans to unveil new mass-market models starting next quarter. Meanwhile, the company is progressing toward scaling production of its humanoid robot, adding another dimension to its long-term growth story.”

While we acknowledge the potential of TSLA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.