Tesla is no longer the world’s largest electric car supplier, having been overtaken by Chinese rival BYD.
Tesla’s (NASDAQ:TSLA) full-year vehicle deliveries totalled 1,636,129 for 2025. That marked a decline of 8.6% from 2024’s numbers, and fell below the 2,256,714 electric vehicles (EVs) that BYD (HK:01211) delivered during the year.
Shares in Tesla fell 2.6% on 2 January, the day the delivery numbers were announced, though they rebounded strongly in the following session, gaining 3.1% on 5 January.
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That leaves Tesla stock trading around 10% higher than it was 12 months ago. Some investors are now shying away from Tesla; its shares dropped off the list of the most-bought stocks on Interactive Investor during December.
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“Tesla is dealing with a series of challenges,” said Victoria Scholar, head of investment at Interactive Investor. “Deliveries fell by more than expected in the fourth quarter and BYD recently overtook Tesla to become the world’s top EV seller.”
The outlook doesn’t look promising assuming that Tesla is being assessed as an EV business.
Growth in passenger EV sales is expected to slow to 12% in 2026, compared to 23% last year, according to Bloomberg.
Global EV sales growth will suffer from a reduction in some Chinese subsidies, US policymakers and consumers veering away from EVs, and Europe considering watering down plans to phase out combustion engines.
But most Tesla bulls take a view that Tesla’s stock isn’t about its EV business.
Can Tesla dominate the world of autonomy?
Those who say that Tesla’s stock is worth buying believe that it is poised to take a leading position in the development of self-driving cars and other forms of autonomy, such as humanoid robots.
Last year saw the launch of Tesla’s long-awaited robotaxi, initially in Austin, Texas, though it has now expanded to San Francisco too (with human monitors in the driver’s seat).
Cybercab, Tesla’s fully autonomous two-person car, is expected to enter production in April, and could be pivotal to Tesla’s future success.
“[Tesla] has started to test the all-important Cybercab in Austin over the past few weeks,” said Dan Ives, global head of technology research at Wedbush Securities. Ives believes that cybercab “remains the golden goose in unlocking Tesla’s artificial intelligence (AI) valuation”.
Ives estimates that the AI and autonomous opportunity is worth $1 trillion to Tesla and that the company will control approximately 70% of the global autonomy market over the next decade.
Is Tesla stock a buy or a sell?
Tesla’s stock currently has a market capitalisation of around $1.5 trillion. Ives believes that progress on robotaxi rollout and cybercab production could lift this figure to $2 trillion – or even $3 billion in his most bullish scenario – by the end of 2026.
But before diving in, investors need to decide whether its growth prospects justify the level it is currently trading at.
Even at its low points, Tesla has been the most expensive Magnificent Seven stock based on its fundamentals for over a year. According to Macrotrends data, the company’s price to earnings (P/E) ratio rose from around 200 at the end of December 2024 to over 300 a year later.
The next highest price-to-earnings ratio in the group is Nvidia’s, at around 47 times trailing earnings – meaning that, in comparison to their earnings over the past year, Tesla stock is more than six times as expensive as Nvidia’s.
Tesla shares closed at $451.67 on 5 January, 50% above ratings agency Morningstar’s fair value estimate of $300.
There is already a lot of assumed good news baked into Tesla’s price: investors need to decide on the relative likelihood of Tesla exceeding or undershooting these expectations before deciding whether or not to invest in Tesla.
