We are seeing play out what Musk last quarter suggested would happen. About three months ago, he predicted that 2025 would be “challenging,” but not as big as some of the challenges the company has faced over the past decade. Musk commented:

“At Tesla, we’ve gone through many, many crises over the years and actually been through many near death experiences… maybe a dozen times. This (2025) is not one of those times. We’re not on the ragged edge of death, not even close. But there are some challenges, and I expect that this year will be, there will probably be some unexpected bumps this year.”

The reason they’re not on the “edge of death”? They have plenty of cash to weather the storm. Last quarter, cash and equivalents ended at $37B, and if deliveries in the back half of the year are down around 5–10%, the burn should be, at worst, a few billion dollars. This leaves the company with well over $30B in cash, more likely between $33B and $35B exiting 2025.

One form of those “bumps” will likely be the June deliveries, which will show a further decline, we believe down around 17% y/y compared to down 13% in the March quarter. Putting additional perspective on the June decline: over the previous five quarters (March 2024 through March 2025), deliveries have been down an average of 3.5%. I looked back and saw this potential 17% decline would mark the worst in 10 years. Hard to imagine that in 2023 deliveries grew by 41%.

So what’s driving this decline? Starting at the highest level, the overall EV market (excluding hybrids) was growing the March 2025 quarter. We estimate that China grew at 30%, Europe at 15%, and the US was flat. This means Tesla is losing share. Two factors drove the share loss: increased competition from BYD, now in both China and Europe, along with brand damage. As a point of reference, a BYD vehicle in Europe sells for roughly 15 to 30% less than a debatably comparable Tesla.

What could increase concern from Tesla investors is that the June quarter will benefit from the first full quarter of the updated Model Y. And if growth rates do soften quarter over quarter, it could push the narrative that things may worsen in the back half of the year once the initial demand for the new Model Y is worked through.

While June will likely prove to be challenging, the outlook should be for improving deliveries in the back half of the year. Unfortunately, investors will have to wait a few weeks until the company reports the June quarter to get that color.

I believe the numbers should begin to improve because of improving brand perception and a potential pull-forward in demand from the likely ending of EV tax credits in the US later this year.

Putting it together, I expect the following delivery growth rates for 2025:

March: down 13% (reported)
June: down 17% Deepwater est. (FactSet down 12%)
September: down 10% Deepwater est. (FactSet down 6%)
December: Flat Deepwater est. (FactSet flat)

A thought on the first half of 2026: playing this forward, it is worth noting that if deliveries do benefit from a pull-forward ahead of the sunsetting of the tax credit, that sets up declines in the first half of 2026. Some of those declines should be offset by the lower-priced Model Y (the more affordable model), which should be ramping production by mid-next year.

Tesla finally delivered the foundation of its autonomous future. The simple fact that they began offering rides, albeit at a small scale and supervised, is a big win. What matters going forward is how fast the company expands the Austin geofence, increases the number of vehicles, and timing of when they launch in one more city (San Antonio, LA, or San Francisco) by year end. Musk has suggested that there will be close to 1,000 vehicles in Austin by the end of September. Given his history of missing targets, I believe investors will be fine if the fleet grows to 100-200 vehicles by the end of September, as it would show a nice step up in availability.

Here’s a recap of what we have seen thus far from Austin. The Robotaxi beta service includes about 10 Tesla-owned Model Y vehicles operating within a tightly geofenced area in Austin, Texas. Access is restricted to a curated group of Tesla enthusiasts and influencers who were hand-selected for this “Early Access” phase. Rides are booked through a dedicated Robotaxi app, and each trip costs a symbolic $4.20. Although the vehicles appear driverless from the outside, a Tesla safety employee is stationed in the front passenger seat, equipped with a kill switch in case intervention is needed. Operations are limited to clear weather and run daily from 6 AM to midnight, with all activity confined to geofenced zone.

The scale of the launch is intentionally narrow, emphasizing control and caution. The vehicles are running on Tesla’s Full Self-Driving (FSD) software, which has improved substantially with version 12, but still requires human supervision and thus remains classified as Level 2 autonomy. While that may seem like a far cry from the fully autonomous future Elon Musk once promised would arrive years ago, this milestone is a critical validation step. By opting for a slow, carefully monitored public deployment, Tesla is aiming to prove that its autonomy tech is not only functional, but also commercially viable in real-world conditions, even if only under optimal constraints for now.

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