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Tesla is on track for its fourth red trading day today, as Elon Musk's overt political role in the Trump administration 2.0 appears to be dampening sales in the EU, and the chatter around "commoditization of autonomous driving" is reducing the stock's sky-high premium. To make matters worse, Needham is out today with a new investment note that purports to introduce a healthy dose of skepticism around Tesla's growth levers.
As mentioned above, Tesla's sales in the EU plunged 47.7 percent year-over-year in January 2025, materializing at just 5,517 units against a sales figure of 10,556 units that Tesla recorded in January 2024.
This is a sign of demand challenges in Q1, which I think will be Tesla's weakest quarter this year for three reasons:
• Brand sentiment
• Lower Model Y production because of the design refresh
• Demand pulled forward in Q4 2024. Many buyers who would have normally purchased… https://t.co/O2mN2XIBi6— Troy Teslike (@TroyTeslike) February 1, 2025
Meanwhile, the environment for Tesla in the US is certainly not what can be characterized as upbeat, with the sales momentum continuing to be hampered by the pull-forward of demand in Q4'24 and the upcoming launch of Model Y Juniper.
Against this bleak backdrop, Tesla bulls can only seek shelter in the stock's premium, enriched by the EV giant's ambitions for its FSD and the Optimus robot.
$TSLA -1.35% [Needham keeps a Hold rating on Tesla, saying that after reviewing the firm’s model, the company’s longer dated growth levers around FSD, Robotaxi and Robotics look “more priced in than not”.
Needham still sees $TSLA as an "expensive stock," needing to trade at…
— NOTRELOAD AI (@thudderwicks) February 10, 2025
Here though, Needham analysts are playing the role of a spoiler by systematically demolishing many of the most firm convictions of Tesla bulls.
To wit, Needham has maintained its neutral rating on Tesla shares on the back of its view that the EV giant's longer dated growth levers, particularly in relation to the FSD, robotaxis, and the Optimus humanoid robot, are "more priced in than not."
Critically, Needham believes that Tesla is operating from a "trailing position" in the autonomous ridesharing and robotics spheres.
Autonomous driving is becoming commoditized, as $F CEO Jim Farley has said many times, as we will hear today from $BYDDY as it adds its “God’s Eye” ADAS systems across its model lineup, and which this Huawei ADAS YouTube video suggests. $TSLA and $GOOG are clearly in the lead,… https://t.co/CXNNSHEGDo
— Gary Black (@garyblack00) February 10, 2025
Meanwhile, there is growing chatter around the commoditization of Tesla's tech moat.
BYD ANNOUNCES INTEGRATION OF DEEPSEEK AI INTO EV SOFTWARE
— Wall St Engine (@wallstengine) February 10, 2025
For instance, BYD has now integrated DeepSeek's AI into its bespoke EV software and is preparing to add the so-called God's Eye Advanced Driver Assistance System (ADAS) to the entirety of its model lineup. And, Huawei's Qiankun ADAS continues to attract eyeballs.
Morgan Stanley estimates China's humanoid market could reach RMB 1-6 trillion by 2050, while the U.S. market is projected to hit $1 trillion. Mass production is expected to start in 2025 by major players like $TSLA, 1X, Agility, and UBTECH.
— Wall St Engine (@wallstengine) February 10, 2025
Additionally, Morgan Stanley believes that China can outpace the US in the humanoid robots sphere, which should limit the TAM for the Optimus robot.
If Tesla's tech moat does end up getting commoditized, then Needham's characterization of the EV giant as an "expensive stock" might prove to be particularly prescient.
Of course, this contrasts sharply with Elon Musk's views, who thinks 2025 will be a pivotal year for Tesla:
"2025 is a pivotal year for Tesla. When people look back on 2025 and the launch of Unsupervised FSD, they may regard it as the biggest year in Tesla's history; It will be regarded as the most important year in Tesla's history."
