It’s been another week for the auto industry and the analysts that cover it.
Tesla’s White House stunt has analysts worried about its outlook. Citibank is banking on non-EV growth for a key Chinese Tesla rival, and Tesla may be gearing up for a new, affordable model in China.
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“It’s all computer!”
On March 11, the White House South Lawn turned into a makeshift outdoor Tesla (TSLA) showroom as President Donald Trump and Tesla CEO and Department of Government Efficiency head Elon Musk toured some of its EVs in front of the press.
The seemingly public display of affection towards Tesla came less than 24 hours after a Truth Social post in which the President denounced ongoing boycotts and protests against Tesla and stated that he planned to buy a Tesla vehicle to demonstrate his support.
One thing that is certain is that he is very impressed with Tesla’s tech.
“Wow, that’s beautiful,” Trump said while settling into a red Model S. “This is a different panel than I’ve had; it’s all computer!”
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Though President Trump noted that Musk and Tesla were being “treated very unfairly by a very small group of people” during the “Tesla Summit,” analysts at Wells Fargo and JP Morgan see the impact as much larger.
In a note published on March 12, JP Morgan auto analyst Ryan Brinkman didn’t mince words and explicitly warned that Musk’s politically charged behavior is responsible for Tesla’s downfall.
“We struggle to think of anything analogous in the history of the automotive industry, in which a brand has lost so much value so quickly,” Brinkman wrote.
In his note, he cut his price target from $135 to $120 and slashed his estimate for Q1 global deliveries from 444,000 vehicles to just 355,000. He pointed to one cause and one only.
“Mr. Musk’s work with the Department of Government Efficiency has proven controversial domestically, and while as many members of the political right may be pleased as those on the left are displeased, the effect on Tesla sales seems nevertheless negative,” he wrote.
Related: Tesla’s White House swooning comes at a disappointing time
In a note on March 14, Wells Fargo analysts Colin Lang and Kosta Tasoulis mentioned similar concerns while they cut their Tesla price target from $135 to $130.
“We initially dismissed concerns about political backlash from Elon’s Trump support, as consumers often act differently than they talk; however, reports of protests & vandalism raise the stakes for potential buyers,” the analysts added.
The Wells Fargo analysts also predicted a 7% year-over-year decline in 2025 vehicle deliveries, expecting a 27% quarter-on-quarter drop in Q1 deliveries to 360,000 units, with some recovery in Q2.
On the contrary, Morgan Stanley analysts wrote in a note on March 11 that Tesla shares had fallen because of “sales data, negative brand sentiment, and market de-grossing” but still saw a buying opportunity.
“Today, with the stock down 50%, our investor conversations are focused on management distraction, brand degradation, and lost auto sales,” the MS analysts said.
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Citibank banks on Tesla rival on non-EV growth
During Tesla’s Q1 2024 earnings report, CEO Elon Musk declared the company an “AI, robotics company,” adding that those who “don’t believe Tesla will solve autonomy should not be an investor in the company.”
“We are excited about our autonomy road map; it is only a matter of time before we exceed the reliability of humans — we are really heading toward an EV, autonomous future,” Musk said. “In the future, gasoline cars that are not autonomous will be like riding a horse.”
On October 10, 2024, Tesla tripled down on its AI and robotic future at its “We, Robot” event.
In front of an audience of “believers,” he unveiled the autonomous Tesla Cybercab, “Robovan,” and the Optimus humanoid robots, which interacted with guests and served drinks at the bar.
However, another Wall Street bank joins UBS in banking on a Chinese Tesla rival in non-EV activities.
Citi upgraded Xpeng (XPEV) from Neutral to Buy and raised its price target from $13.70 to $29, citing stronger projected volumes for 2025 and 2026.
The Citi analysts now forecast that XPeng will sell 480,000 of its cars in 2025 and 580,000 in 2026, up from previous estimates of 260,000 and 330,000.
The revision comes as XPeng recently revealed firm February orders, plans to launch 2-3 battery electric vehicles and one extended-range EV this year, and rising demand for EVs in China. However, Citi highlighted Xpeng’s focus on AI and robotics as a potential growth driver.
“Xpeng has expressed its commitment to the AI/Robotics field, and we see some upside risk to Xpeng if it achieves decent progress,” the bank’s analysts wrote.
Citi’s revelation comes after UBS analysts made a substantial upgrade.
In a note published on February 24, UBS analysts upgraded XPeng stock from sell to neutral, citing growing investor interest in the company’s artificial intelligence (AI) technology.
“After DeepSeek shocked equity markets, we believe investors are now willing to assign some value for AI potential, even remote applications,” UBS analysts said in its note.
UBS analysts believe that XPeng’s AI focus has set it apart from other Chinese EV makers. The company sets aside nearly 50% of its annual R&D budget for intelligence and AI.
“XPeng launched its first large multimodal model, XGPT, in late 2023, and as of now, is the only Chinese EV maker that is working on a humanoid robot,” they said.
Tesla
A cheaper Tesla, finally?
If one can identify the juiciest, most hyped, and most anticipated future Tesla product, it would be a cheaper Tesla EV.
On December 9, 2024, analysts at Deutsche Bank issued a note stating that they met with Travis Axelrod, the automaker’s Head Of Investor Relations, at its Autonomous Driving Day in New York City.
The note noted that the storied EV firm will launch a vehicle it dubs the “Model Q,” a more affordable Tesla model.
“The new Tesla model (we refer to as “Model Q”) should launch in 1H25 and will be priced <$30k including subsidies (i.e., $37,499 if US EV tax credit goes away)," Deutsche Bank analyst Edison Yu said in his note.
Related: Tesla’s mysterious model draws harsh words from online skeptics
Though onlookers and Tesla skeptics took the Deutsche note with an extreme grain of salt, a new report from Reuters seems to say otherwise.
According to Reuters, the new car, codenamed “E41,” will initially be built in Shanghai using existing assembly lines and current models’ technologies to keep costs down. According to two unnamed sources cited by Reuters, the car will be smaller and cost at least 20% less to make than its newly refreshed Model Y.
Earlier this year, during its Q4 2024 results, Tesla said that “plans for new vehicles, including more affordable models, remain on track for the start of production in the first half of 2025.”
It added that the new EVs would use parts of its next-generation and current platforms and would be produced on the same manufacturing lines as the current passenger vehicle lineup.
Production for the European and North American markets is said to be planned to follow, however no solid timeline was given for other regions.
The focus on sales in China comes as Tesla sales dip worldwide, including the United States. In 2023 and 2024, the Model Y was the bestselling car in China, but increased competition from Chinese domestic automakers resulted in a roughly 1% dip in Tesla’s EV market share in the country.
Related: Veteran fund manager issues dire S&P 500 warning for 2025
