Tesla's Deliveries Plummet: Should You Buy, Hold, or Sell Now?

On April 2, Tesla (NASDAQ: TSLA) released its quarterly vehicle delivery report for the first quarter of 2025. Global electric vehicle (EV) deliveries dropped 13% year over year to 336,681, falling more than 53,000 short of the analyst expectations of 390,000 vehicle deliveries (based on Bloomberg data). It even widely missed the consensus estimate sent by Tesla's investor relations team to some analysts of 377,590 deliveries.

Along with the lower-than-expected vehicle deliveries, investors are concerned about the potential escalation in trade wars between the U.S. government and most of its trading partners related to last week's decision to levy various levels of import taxes on all goods coming into the country from elsewhere. This led to Tesla's stock declining by nearly 10.4% on April 4, amid a broader market sell-off. The stock was down an additional 3% on April 7 (as of this writing). Overall, Tesla stock is down by about 42% so far in 2025.

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Given this valuation retreat, should investors buy, hold, or sell, Tesla stock right now?

Tesla is facing multiple headwinds

Tesla is working to overcome multiple challenges that can affect its long-term growth trajectory.

First and foremost, the company is vulnerable to the U.S. government's tariff policies. The U.S. government has levied a baseline 10% import tax on all goods brought into the country from its trading partners, it has placed even higher tariffs on European Union and Chinese goods. In retaliation, China has announced a 34% tariff on U.S. goods. While Tesla manufactures and assembles its EVs in the U.S., Europe, and China, select parts are imported from elsewhere as part of the process and will likely get taxed by some government entity.

Also, there is real concern that China will rally its populace to boycott U.S. products as part of the trade war developing. China accounts for nearly 22% of Tesla's 2024 revenue, so these added tariffs (as well as threatened retaliatory tariffs by both the U.S. and China) could result in a significant loss of business and cost escalation for the company. Boycotts are also being seen in some E.U. countries.

Second, CEO Elon Musk's political ambitions and ties to the Trump administration are creating adverse effects on the company's brand perception and alienating many customer demographics both domestically and abroad. Protests at Tesla dealerships, instances of vandalism of Tesla vehicles and dealerships, and calls for boycotts of all Musk-associated products in the U.S. are having a noticeable effect.

Third, Tesla is seeing much more intense competition from multiple sources, especially Chinese electric vehicle manufacturers such as BYD and Xpeng, and is losing market share in multiple markets. In February 2025, the company accounted for 10.3% of the European Union's battery electric vehicle market, significantly lower than the 21.6% share in the same quarter of the prior year.

These headwinds (and others) have led to Tesla's financial performance weakening significantly. In 2024, automotive revenue declined 6.5% to $77.07 billion. The drop is expected to worsen in 2025 (Q1's report has not yet been released). The company's operating margin of 7.2% in 2024 also deteriorated, down from 16.8% in 2022.

Potential catalysts for recovery

Despite the multiple challenges, some catalysts could help Tesla's share price recover in the coming months.

Tesla is gearing up to launch an affordable Model Y EV in the first half of 2025, potentially increasing Q2 sales. Musk also announced plans to begin an unsupervised full self-driving (FSD) paid service in Austin in June 2025. This is the promised robotaxi service many investors are hoping will be a huge growth driver for the company in the years to come. Much of Tesla's elevated valuation in comparison to other auto manufacturers is tied to the potential of this service.

If the company hits these goals, it could dramatically boost share prices.

Tesla also expects strong momentum from its energy storage business, with "at least 50% growth in deployments year over year in 2025." It isn't a significant revenue source at the moment, but it could become a more significant revenue source as demand for grid- and home-based energy storage rises.

Tesla is also touting its Optimus humanoid robot as a potential significant growth catalyst, with Musk estimating its revenue potential to be over $10 trillion. The company currently plans to develop several thousand robots for internal use in 2025.

What's next?

Tesla stock trades at a very high valuation level despite facing multiple headwinds. Even after a recent share-price slide, the company trades at 114 times its forward earnings estimates.

Tesla's share price has a history of volatility and a history of rebounding significantly after deep falls. In 2018, the SEC filed a lawsuit against Musk for securities fraud (associated with disclosure controls and procedures related to his previous tweets about taking Tesla private). The stock crashed nearly 35% from its peak in August 2018 to its low in October 2018. However, as Model 3 production started ramping up, Tesla's stock recovered in 2019.

Tesla stock also fell almost 60% from its peak in February 2020 as the COVID-19 pandemic caused factory closures and supply chain disruptions. However, the stock rebounded to new highs in June 2020 due to substantial vehicle delivery numbers and the resumption of vehicle production at its Fremont, California, factory. So Tesla has managed to recover its share price losses and even post gains after significant declines.

It seems that, while public relations setbacks and leadership controversies may cause short-term share price volatility, long-term share price growth depends mainly on solid company fundamentals. If Tesla releases better-than-expected delivery numbers in future quarters, meets its timelines for new vehicle launches, or demonstrates significant progress in AI-powered initiatives such as FSD, robotics, and energy storage, the stock may again see a solid rally.

Considering the above possibilities, investors considering opening a position in Tesla may want to delay purchasing or opt for a dollar-cost averaging strategy to control risks. Investors with a position in the stock and a high-risk appetite should probably consider holding on to the position in hopes that potential long-term gains resume.

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Manali Pradhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends BYD Company. The Motley Fool has a disclosure policy.