Tesla's core electric vehicle business is increasingly slipping in investor discussions, even as short-term fundamentals remain weak, according to Barclays analyst Dan Levy.
Ahead of the announcement of first-quarter deliveries, Levy expects Tesla to report around 350,000 units, below the consensus estimate of approximately 375,000, reflecting weaker demand trends across key regions. Deliveries are expected to decline sequentially, with particularly sharp drops in China and modest declines in the US, partly related to the expiration of tax breaks for electric vehicles.
With first-quarter deliveries being the weakest seasonally of the year, Levy said investors are likely to focus more on the outlook for the rest of 2026 and whether Tesla will continue to drive production growth.
But the analyst argues that these fundamentals are no longer the primary driver of the stock. Prior to the announcement of first-quarter deliveries, it became increasingly clear to us that car volumes (and broader fundamentals) were increasingly becoming an afterthought, he wrote in a note.
At this stage, we believe the stock is being driven almost exclusively by the narrative, with hopes pinned on a number of Tesla's upcoming turning points in Robotaxi, Optimus, and artificial intelligence, Levi added.
Margins are also expected to come under pressure in the quarter, mainly due to lower volumes and higher raw material costs, although factors such as the regional mix, reduced incentives in the United States, and tariff-related offsets could provide some support.
Despite a decline in investor focus on electric vehicles, Levi cautioned that the automotive business remains fundamental. He stated that a strong core automotive business will be necessary to fund part of Tesla's growth ambitions, particularly given the company's planned capital expenditures of approximately $20 billion in 2026.
