Analyst Says Tesla (TSLA) Auto Business ‘Continues to Worsen’

We recently published Top 10 Stocks to Watch After Federal Reserve’s Rate Cut. Tesla, Inc. (NASDAQ:TSLA) is one of the stocks analysts were recently talking about.

In late July, Jed Dorsheimer, a William Blair analyst, said in a program on CNBC that Tesla’s deal with Samsung for chip production was positive and showed a “data point” that Elon Musk is innovating. However, the analyst explained why he downgraded the stock:

“The reason for our downgrade was the auto business continues to worsen. And yes, it’s not, you know, people are looking at these other businesses, but the margin structure, I think the the stock was able to perhaps absorb the $7,500 hit in terms of the tax credits where the vehicles will be more expensive, but then you got the double hit in terms of the regulatory fines that went away, rendering almost $3 billion of pure margin worthless on a go forward. So that just makes the business more challenging and further widens the gap between you know the core business which is auto energy right now and energy is getting better I I should say and these future opportunities that are still you know relative infancy that need to scale.”

Copyright: wolandmaster / 123RF Stock Photo

Tesla shares are up 27% over the past month. The stock recently rallied after Musk bought back $1 billion worth of TSLA shares. Tesla’s EV sales are falling all over the world as the company faces challenges from competitors. Tesla’s global sales in the second quarter fell 14% year over year. Even if Elon Musk increases his focus to fix the company’s problems, it would take a lot of effort to come out of the demand crisis. For example, in California, the largest U.S. market for electric vehicle adoption and sales, Tesla sales fell about 12% year over year in 2024, causing its market share to drop from 60.1% in 2023 to 52.5% in 2024. Was it because Californians are buying fewer EVs? No. Californians purchased more than 2 million electric cars during the year, almost double when compared to the past two years.

Baron Focused Growth Fund stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its second quarter 2025 investor letter:

“Tesla, Inc. (NASDAQ:TSLA) designs, manufactures, and sells electric vehicles (EVs), solar products, and energy storage solutions, while also developing advanced real-world AI technologies. Despite ongoing macroeconomic challenges and regulatory complexities, shares climbed after Tesla completed a limited commercial rollout of its highly anticipated robotaxi business in Austin—following more than a decade of development and billions of dollars in investment. This milestone signals a potentially transformative shift in the automotive industry and opens up a sizable new market beyond the company’s core operations. Investor sentiment also improved after Elon Musk stepped back from government-related engagements, boosting confidence in Tesla’s near-term execution. Tesla introduced a refreshed Model Y globally, featuring design and performance upgrades, and outlined plans to unveil new mass-market models starting next quarter. Meanwhile, the company is progressing toward scaling production of its humanoid robot, adding another dimension to its long-term growth story.”

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Disclosure: None. This article is originally published at Insider Monkey.