Barclays Says Tesla EV Business Importance to Investors Is Declining

Investing.com - Barclays analyst Dan Levy says that Tesla’s core electric vehicle (EV) business is increasingly becoming marginal in investor discussions, despite recent ongoing weakness in fundamentals.

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Before the Q1 delivery data is released, Levy expects Tesla to deliver about 350,000 vehicles, below the market consensus of approximately 375,000, reflecting soft demand trends in major regions. Deliveries are expected to decline quarter-over-quarter, with weakness especially evident in the Chinese market. The US market has also seen a slight decline, partly due to the expiration of EV tax credits.

Since Q1 deliveries are usually the weakest of the year, Levy says investors may focus more on the outlook for the rest of 2026 and whether Tesla will continue to guide for production growth.

However, the analyst believes these fundamentals are no longer the main drivers of the stock price. “Before the Q1 delivery data is released, it’s increasingly clear that vehicle sales (and broader fundamentals) are becoming secondary considerations,” he wrote in a research report.

“Currently, we believe the stock is almost entirely driven by narratives, with investors hoping for multiple ‘inflection points’ in Tesla’s Robotaxi, Optimus, and AI initiatives,” Levy added.

Profit margins this quarter are also expected to face pressure, mainly due to declining sales and rising raw material costs, although factors such as regional mix, reduced US incentives, and tariff-related offsets may provide some support.

Despite investors’ waning focus on the EV business, Levy warns that the automotive segment remains critical. He states, “A solid core automotive business will be necessary to fund Tesla’s growth vision, especially considering the company’s planned approximately $20 billion in capital expenditures in 2026.”