If Tesla shares were a road trip, 2025 has been like experiencing a bumpy ride on what was otherwise meant to be a smooth journey. Investors who buckled up for a world of robotaxis, humanoid robots, and clean energy supremacy are instead facing so many warnings of slowing car sales, contracting margins, and a valuation that is still priced as if Tesla is already leading the world’s transport system. The firm is still a symbol of innovation, but currently, it’s also a reminder that even visionaries get stuck in traffic.
Tesla hasn’t been shy of volatility, but 2025 has proven to be particularly challenging. Shares have declined around 14% year to date, which has caused investors to wonder if the EV titan is still worth its lofty valuation or not. While Tesla’s proud bets on autonomy, energy storage, and even humanoid robots tend to make the headlines, the reality is very much pinned to its core auto business, and that is showing indications of draining.
Fragility in its Core Business
Tesla’s second-quarter report highlighted the pressure points. Sales of $22.5 billion were down 12% year over year, while overall gross margin dropped to 17.2% from 18% in the same period last year. Automotive margins declined even further from 18.5% to 17.2%, which was weighed down by lower average selling prices and decreased regulatory credit contribution.
On the other hand, deliveries were also underwhelming. Tesla delivered 384,122 cars during Q2, which is down from roughly 444,000 in the previous year’s quarter. Softness in demand and price pressures are bearing down hard, while energy, though making some progress as its margins lifted to 30.3%, remains too limited to significantly counter the strain. For the moment, it seems like cars continue to be the financial pillar, and fragility is flowing across its stock.
A Daring Path
Tesla is encouraging investors to ignore its core business that is its cars and look forward toward its bets on the future. CEO Elon Musk pointed to three revolutionary undertakings, which are autonomy, energy storage, and humanoid robotics. In terms of its autonomy and Ride-Hailing, Musk asserts that the Robotaxi fleet could reach “probably half the population of the U.S by the end of the year”, which is subject to regulatory approvals. Pilot projects are on the go in Austin, but wide-scale deployment involves overcoming the technical and legal obstacles. Also, implementation is extremely uncertain as well.
In terms of its energy storage, this sector is gently getting better, along with increasing gross margins and growing installations. But it is still small in scale when compared to its vehicles. On the other hand, in terms of its Humanoid Robotics, Musk’s statement regarding factory deployment of robots by late 2025 is interesting. However, its mass production, commercialization, and customer adoption are still far from established. Tesla’s master plan is certainly aspirational, but the risk of its execution is gigantic, as investors are being asked to fund not one, but multiple innovative projects.
Tesla’s Valuation
Even following the recent retreat, Tesla’s market cap floats around $1.1 trillion, which implies enormous success in autonomy or energy, or both. At over 200 times earnings, the valuation requires almost flawless performance on several fronts. That’s a lot to ask when the deliveries of its vehicles are contracting and its auto margins are eroding.
However, for long-term investors, the bet on Tesla depends on two key points. The first is the evidence that Tesla is recovering its share in cars and is stabilizing margins. The second point is that Tesla’s progress in commercializing autonomy beyond pilot projects should be evident and quantifiable. In the meantime, Tesla is a stock that is rich in vision, but is poor on short-term earnings visibility.
Bottom Line
Tesla is definitely one of the world’s most progressive companies, with a wide range of options in autonomy, energy, and robotics. However, the fundamentals still start and end with its famous cars today. Tesla’s deliveries are declining, its margins are being squeezed, and autonomy seems more like a promise than profit. For investors holding Tesla stock, it is all about closely monitoring tangible developments in deliveries, margins, and autonomy milestones. For other investors, holding out for now might be sensible until the story is supported by any sort of successful implementation.
Tesla is one of the most innovative and exciting companies, but innovation by itself isn’t worth sky-high valuations, instead execution is. For long-term enthusiasts, owning Tesla demands patience, faith, and risk tolerance. However, for new investors, sitting patiently for more solid evidence of margin recovery, strength of vehicle demand, or a concrete autonomy monetization might be the wiser move. Tesla has a blueprint for transforming industries, but it still needs to demonstrate that it can ride out the bumpiness of the road.
