The automotive industry is abuzz with the latest news from Tesla, the electric vehicle (EV) giant. Despite its reputation as a pioneer in the EV market, Tesla’s dependence on car sales is expected to lead to disappointing earnings in 2025. In this article, we will delve into the reasons behind this forecast and what it means for the company’s future.
Background
Gordon Johnson, CEO of GLJ Research LLC and a renowned Tesla bear, has expressed his skepticism about the company’s high price targets. He believes that Tesla’s valuation is based on the assumption that it is more than a car company, which he argues is not accurate. Johnson points out that in the fourth quarter of 2024, approximately 77% of Tesla’s revenue came from car sales.
Decline in Car Sales
The decline in Tesla’s car sales is a significant concern. According to a report by the California New Car Dealers Association (CNCDA), Tesla’s vehicle registrations in California have been decreasing for five consecutive quarters. In 2024, the company had 203,221 vehicle registrations in California, which is nearly 12% lower than the previous year. This decline is attributed to various factors, including Elon Musk’s political leanings, which may have alienated some customers in the Democratic stronghold of California.
Impact on Earnings
The decline in car sales is expected to impact Tesla’s earnings in 2025. The company’s automotive revenue accounted for $19.8 billion of its total revenue of $25.71 billion in the fourth quarter of 2024. With car sales declining, Tesla’s revenue is likely to decrease, leading to disappointing earnings.
Comparison to Other Analysts
Not all analysts share Johnson’s pessimistic view. Dan Ives, an analyst at Wedbush Securities, believes that Tesla is an AI and robotics company, rather than just a car company. He has a price target of $550 for Tesla and an “outperform” rating. In contrast, GLJ Research maintains a “sell” rating with a price target of $24.86.
Conclusion
In conclusion, Tesla’s dependence on car sales is expected to lead to disappointing earnings in 2025. The decline in car sales, particularly in California, is a significant concern for the company. While some analysts remain optimistic about Tesla’s future, others, like Gordon Johnson, are more skeptical. As the EV market continues to evolve, it remains to be seen how Tesla will adapt and respond to these challenges.
Key Statistics
- 77% of Tesla’s revenue came from car sales in the fourth quarter of 2024
- 203,221 vehicle registrations in California in 2024, down 12% from the previous year
- Tesla’s automotive revenue accounted for $19.8 billion of its total revenue of $25.71 billion in the fourth quarter of 2024
- Wedbush Securities has a price target of $550 for Tesla, while GLJ Research has a price target of $24.86
What’s Next for Tesla?
As Tesla navigates the challenges of the EV market, it will be interesting to see how the company responds to these concerns. Will Tesla be able to diversify its revenue streams and reduce its dependence on car sales? Only time will tell. Stay tuned for further updates on this developing story.