VALUATION HIGHLIGHTS

1. Automotive constitutes 79% of the Trefis price estimate for Tesla Motors's stock.
2. Energy Generation& Storage constitutes 11% of the Trefis price estimate for Tesla Motors's stock.

WHAT HAS CHANGED?

Tesla Q4 2025 Earnings

Tesla reported Q4 2025 revenue of about $24.9 billion, down 11% year-over-year, while adjusted EPS stood at $0.50. While strong energy storage deployments remained a bright spot, the auto business faced headwinds due to tax incentive expirations, pricing pressure, and tough competition. Heavy spending on R&D and AI initiatives also weighed on profits.

Tesla to end Model S And X production

Tesla is ending Model S and X production to repurpose its Fremont factory for Optimus humanoid robots, signaling a strategic shift away from low-volume legacy vehicles toward longer-term AI-driven ambitions. While Models 3 and Y dominate deliveries, Tesla's automotive business faces challenges, and Optimus remains pre-commercial. The move increases execution risk but underscores Tesla's intent to reposition Tesla beyond conventional EV manufacturing.

BUSINESS SUMMARY

Tesla is focused on designing, manufacturing, and selling electric vehicles and related technologies. The company's current model lineup includes the Model 3 sedan, the Model Y compact SUV, and the Cybertruck pickup truck. Tesla also sells renewable energy products such as solar panels and battery technology. The company's upcoming products include the semi truck and the second generation of the Roadster sports car.

SOURCES OF VALUE

Most of Tesla's value comes from its mass-market vehicles, such as its Model 3 and Model Y.

Future model launches

Tesla currently offers the Model 3, Model Y vehicles, the Cybertruck pickup truck, and the soon-to-be-discontinued Model S and X. Tesla is expected to take its first step away from the luxury passenger vehicle market into the commercial space, with plans to launch an all-electric semi-truck.

Transition to EVs a global priority

Under former President Joe Biden, the U.S. has pledged to achieve carbon neutrality by 2050. We are seeing similar commitments from other developed countries across the world. This means that the process of decarbonizing the transportation space will have to speed up, with gasoline-powered vehicles being replaced with cleaner EVs and hybrids. This should bode well for Tesla, one of the market leaders in the premium EV space.

KEY TRENDS

Falling battery costs to help the adoption of electric cars

According to Bloomberg New Energy Finance (BNEF), the industry average battery cost (cell plus packaging) dropped from $288 per kilowatt-hour in 2016 to $132 in 2021, driven by higher volumes and technological advancements. Costs ticked up in 2022 due to supply chain issues but declined to about $128 per kilowatt-hour in 2023 and $115 per kilowatt-hour in 2024. Tesla likely benefits from even lower costs than the industry average, given its scale as one of the largest EV makers.

The electric car space is getting increasingly competitive.

Mainstream automotive manufacturers are getting more serious about their electric vehicle programs as they look to take advantage of all-electric drive trains' performance and cost advantages. For instance, Volkswagen announced it would invest as much as 70 billion euros (~$84 billion) in bringing around 300 electric models to market by 2030.