TLDR
- Tesla shares tumbled 4% after Business Insider reported a planned one-week manufacturing halt at the Austin gigafactory
- Wells Fargo slashed Q2 delivery estimates to 343,000 vehicles, predicting a 21% year-over-year decline
- The investment bank warns Tesla faces potential $1.9 billion free cash flow deficit in 2025
- Senate decision to strip California’s emission authority threatens Tesla’s regulatory credit business
- Robotaxi testing in Austin draws criticism from safety groups ahead of June 22 service launch
Tesla investors endured another rough trading session Tuesday as manufacturing setbacks and pessimistic Wall Street coverage weighed on the stock.
The electric vehicle maker’s shares plunged nearly 4% following reports of an upcoming production freeze at its Texas manufacturing hub. According to Business Insider, Tesla will shut down Cybertruck and Model Y assembly operations for seven days starting June 30.
Company officials told workers the temporary closure is necessary for production line maintenance. This marks the Austin plant’s third such interruption over the past year.
Tesla has remained silent on requests for official comment regarding the manufacturing pause. The timing creates additional complications as the company prepares its autonomous taxi service for Austin debut.
The robotaxi program launches June 22 using specially equipped Model Y vehicles. These cars feature Tesla’s latest Full Self-Driving software iteration.
Musk amplified excitement for the service by sharing test footage on social platform X earlier this month. The video showed a robotaxi navigating Austin’s street network autonomously.
Analyst Downgrades Paint Grim Picture
Wells Fargo unleashed a scathing analysis of Tesla’s business fundamentals that sent shares lower. Lead analyst Colin Langan dramatically reduced his quarterly delivery projections.
The bank now expects Tesla to deliver just 343,000 vehicles in Q2. This figure trails the prior year period by 21% and falls well short of Wall Street consensus.
Langan pointed to deteriorating Model Y performance as a primary concern. The analyst noted rising inventory levels combined with aggressive promotional campaigns.
Tesla’s promised affordable vehicle remains absent from production schedules. This budget model was supposed to drive volume recovery in the year’s latter months.
While base pricing holds steady, Tesla continues expanding financing deals and discount programs. Langan anticipates these moves will pressure already thin profit margins.
The stock’s afternoon decline outpaced broader market weakness. Tesla has lost 22% of its value this year despite posting 68% gains over the previous 12-month stretch.
Cash Generation Under Threat
Wells Fargo’s report highlighted mounting risks to Tesla’s financial stability. The analyst projects the company could burn through $1.9 billion in free cash flow during 2025.
This would represent Tesla’s first negative cash generation year since 2018. Multiple factors contribute to the deteriorating financial outlook.
Recent Senate action eliminated California’s vehicle emission regulatory framework. This decision directly threatens Tesla’s regulatory credit sales to other automakers.
Companies previously purchased these credits from Tesla to comply with California’s zero-emission requirements. Wells Fargo calculates losing this revenue could slash annual earnings by 16%.
California filed federal court challenges seeking to overturn the Senate decision. The legal proceedings could take months or years to resolve.
Beyond regulatory changes, Tesla faces pressure from declining delivery volumes and ongoing price competition. Import tariffs add another layer of cost pressure.
The company maintains heavy capital spending on factory expansion and technology development. These investments strain cash resources during a period of weakening core business performance.
Langan expressed particular concern about Tesla’s robotaxi ambitions in Austin. The analyst described current testing as limited in scope with extensive human oversight.
He warned that aggressive expansion could backfire if accidents occur during early deployment phases. Safety incidents would likely trigger regulatory scrutiny and public backlash.
Protest groups gathered Thursday to voice opposition to the robotaxi program. The Dawn Project conducted a public demonstration highlighting FSD software limitations.
Their test used a current Model Y equipped with publicly available FSD technology. The vehicle failed to stop for a school bus and struck a child-sized dummy.
Government data shows Tesla’s driver assistance features have contributed to hundreds of crashes nationwide. Fatal accidents involving these systems number in the dozens according to federal records.
Despite safety concerns, some analysts view autonomous driving as Tesla’s path to massive valuation gains. Bulls argue robotaxi services could generate trillions in future revenue.
Langan calculated Tesla currently trades at 172 times forward earnings estimates. This premium valuation assumes flawless execution of ambitious technology goals.
Wells Fargo maintains its Underweight rating with a $120 share price target. The firm adopted this bearish position in March 2024 and missed Tesla’s post-election surge.
The latest production halt news compounds existing investor worries about Tesla’s operational execution and delivery growth trajectory.
