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Tesla’s (TSLA) innovative streak and ambitious plans have long captured the imagination of investors who view the company as synonymous with high-growth potential and technological breakthroughs. Two of its promising vehicles, the futuristic Cybercab and the highly anticipated Tesla Semi, represent significant opportunities for the company to expand into new, lucrative markets. However, the recent escalation in U.S.-China trade tensions has cast a cloud of uncertainty over these pivotal projects, with Tesla reportedly suspending component shipments from China that could derail their timelines.
In this article, we’ll dive into how the tariff battle is affecting Tesla’s high-stakes vehicle projects and discuss whether investors should stay bullish on TSLA stock, adopt a cautious stance, or even reconsider their position entirely amid the heightened uncertainty.
About Tesla Stock
With a market cap of $834 billion, Tesla (TSLA) is a prominent innovator dedicated to accelerating the global transition to sustainable energy. The Elon Musk-led powerhouse designs, develops, manufactures, leases, and sells high-performance fully electric vehicles, solar energy generation systems, and energy storage products. It also offers maintenance, installation, operation, charging, insurance, financial, and various other services related to its products. In addition, the company is increasingly focusing on products and services centered around AI, robotics, and automation.
The EV maker has faced significant challenges in 2025, with TSLA stock losing more than a third of its value year-to-date. Major reasons for this sharp decline include slowing EV sales, CEO Elon Musk’s controversial political activities, and intensifying U.S.-China trade tensions.
Trump’s Tariffs Disrupt Tesla’s Production Plans for Semi and Cybercab
The trade war initiated by President Donald Trump, characterized by his continually shifting tariffs, has disrupted the plans of supply chain managers across the globe — and Tesla is no exception. The EV maker relies heavily on imported parts from China, Mexico, Canada, and Europe for many of its U.S.-based manufacturing programs, including the production of its upcoming vehicles: Cybercab and Tesla Semi. Reuters reported last week that Tesla’s plans to import certain parts from China for its Cybercab and Semi production in the U.S. have been put on hold following the escalation of trade tensions between the world’s two largest economies.
The report said that Tesla was prepared to absorb the additional costs when Trump implemented a 34% tariff on Chinese goods. However, when the final tariff rate exceeded that level, Tesla deemed it unsustainable, leading to the suspension of its shipping plans. As a reminder, Trump increased his reciprocal tariffs on Chinese goods to 125% in early April, bringing the total tariffs to 145%.
According to the report, Tesla was set to begin receiving component shipments in the coming months, aiming to start trial production of the two models in October and ramp up to mass production in 2026, with Cybercab slated for production in Texas and Semi in Nevada. It remains unclear how long the suspension will continue. With that, the delay could significantly affect the company’s growth narrative, given that both projects are expected to inject new momentum into a business currently grappling with rising competition and slowing EV sales.
Meanwhile, investors found some relief on Tuesday, April 22 after U.S. Treasury Secretary Scott Bessent stated at a closed-door investor summit that the tariff standoff with China is “unsustainable” for both sides, and that the world’s two largest economies will ultimately need to pursue deescalation. He expressed optimism that tensions might ease in the coming months but warned that reaching a broader agreement could take more time. Also, Trump told reporters late on Tuesday that U.S. tariffs of 145% on Chinese goods will be reduced “substantially” if the two sides can reach a deal. These were positive developments for Tesla, as the deescalation would enable the company to resume importing components from China and stay on track with its production plans for Cybercab and Semi.
The recent earnings report also included some positives, notably the company updating the status of its Cybercab and Tesla Semi projects to “construction.” Management added that Cybercab production is scheduled to begin in 2026. At the same time, Tesla acknowledged that Trump’s trade war negatively affects its global supply chain and “could significantly impact demand” in the near term. So, the signals we’ve received are somewhat mixed, making it difficult to either confirm or refute the Reuters report.
How Did Tesla Perform in Q1?
On April 22, Tesla was the first of the Magnificent 7 companies to report quarterly earnings. Despite missing on both lines in Q1, TSLA stock climbed over 5% in the following trading session as CEO Elon Musk said he would “significantly” scale back his involvement in the Department of Government Efficiency. Musk committed to dedicating more time to making Tesla the world’s most valuable company, stating he would only spend “a day or two a week” on government matters. The company also confirmed that it is progressing as planned with the production of its more affordable models and Cybercab. While this offered some reassurance to investors, Tesla’s Q1 results were dismal, so let’s take a closer look at the numbers.
The EV maker’s total revenue fell 9.2% year-over-year to $19.34 billion, missing Wall Street’s consensus by $2.07 billion. While the softness in Tesla’s top line was hinted at in its earlier Q1 delivery update, what truly stands out is the magnitude of the miss, with revenue falling short by approximately 10%. The drop in total revenue was driven by a downturn in Tesla’s core automotive segment. With that, Tesla’s automotive revenue fell 20% year-over-year to $13.97 billion, pressured by lower average selling prices and a sharp drop in delivery volumes.
Looking at the other parts of the business, the Energy segment continued to be a bright spot for the company. The segment’s revenue surged 67% year-over-year to $2.73 billion, fueled by higher deployments of Megapack and Powerwall systems. Notably, the company achieved a fourth sequential record for Powerwall deployments, surpassing 1 GWh for the first time, while remaining limited by supply constraints. Still, Tesla noted that the Trump administration’s current tariff plans could have a “relatively larger impact” on its renewable energy business than on its automotive segment, adding that it is “taking actions to stabilize the business in the medium to long-term and focus on maintaining its health.” Moving on, revenue from the services and other segment increased 15% year-over-year to $2.64 billion. This segment encompasses used vehicle sales as well as Supercharger revenues. While both segments provided some differentiation to Tesla’s business model, their growth wasn’t sufficient to offset the poor performance of the automotive business.
When it comes to profitability, the situation appeared even more dire. The company’s gross margin declined by 104 basis points year-over-year to 16.3%. Declining revenues and shrinking margins led to a steep 66% year-over-year drop in Tesla’s operating profit to $399 million. Its first-quarter adjusted EPS stood at $0.27, down 40% year-over-year and missing expectations by $0.15.
Meanwhile, investors were also updated on Tesla’s advancements in autonomy and artificial intelligence, as Musk continues to place greater emphasis on these areas as key to the company’s future. “Autonomous driving is the next phase of the future of Tesla,” said Musk, adding that despite several setbacks, the robotaxi project remains on schedule. The company plans to launch the service in Austin this June, with “millions of Tesla’s operating autonomously in the second half of next year.” Musk also noted that the company is making “good progress” on the development of its Optimus humanoid robot. Tesla anticipates deploying thousands of Optimus robots across its factories by the end of the year, with Musk projecting annual production could reach one million units by 2029.
TSLA Valuation and Analysts’ Estimates
On Tuesday, Tesla withdrew its full-year guidance, citing the uncertain economic environment and its impact on the business, and announced it would “revisit” its 2025 outlook during the Q2 update. Currently, analysts tracking the company foresee a 20.31% year-over-year drop in its adjusted EPS to $1.93 for fiscal 2025, with revenue expected to fall 1.16% year-over-year to $96.55 billion.
In terms of valuation, Tesla does not look appealing at current levels. TSLA stock is currently trading at a forward Non-GAAP P/E ratio of 94.23x, which is markedly above the sector median of 13.82x. For me, it’s extremely hard to justify such a valuation for a company that just posted declines in both revenue and earnings, yet positions itself as an innovative growth leader.
What Do Analysts Expect for TSLA Stock?
Wall Street analysts remain cautious on Tesla, giving the stock a consensus “Hold” rating. There is a considerable divergence in recommendations from analysts covering the stock. With that, 16 analysts rate TSLA stock as a “Strong Buy” and two recommend it as a “Moderate Buy.” At the same time, 13 analysts recommend holding the stock, and 10 give it a “Strong Sell” rating. The mean target price for TSLA stock is $280.71, suggesting minimal upside potential from current levels.
The Bottom Line on TSLA Stock
As of the first quarter, Tesla appears to be moving in the wrong direction fundamentally, with declines in revenue, margins, and profitability. Of course, Tesla continues to work on promising projects in AI, robotics, and autonomous driving, but so far, these efforts have yet to translate into financial contributions. Also, be sure to factor in the risks tied to the uncertain global macroeconomic outlook and the growing competition in the EV market. In addition, although management stated that Cybercab production remains on schedule and the Semi project has moved to the “construction” phase, it remains uncertain whether the company can maintain its timeline amid U.S.-China trade tensions, as any delays could affect its growth narrative. Putting it all together, I don’t see any fundamental reason to buy TSLA stock right now and would give it a “Hold” rating.
On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
