Why Tesla's Stock Rally Ignores EV Delivery Setbacks – And Why Investors Might Be Wrong

The Market’s New Focus: Beyond Traditional EV Numbers

Tesla’s electric vehicle delivery numbers paint a concerning picture for its core business. However, Wall Street and retail investors appear largely indifferent to these headwinds, choosing instead to bet heavily on the company’s experimental ventures.

EV Deliveries Miss Expectations, Continuing a Downward Trend

In the fourth quarter of 2025, Tesla delivered 418,227 electric vehicles – falling short of Wall Street’s consensus estimate of approximately 426,000 units by roughly 2%. More troubling is the year-over-year comparison: Q4 deliveries plummeted nearly 16% compared to the same period in 2024. Across the full year, the company managed 1.64 million vehicle deliveries, representing a 9% decline from 2024 figures.

The composition of these deliveries reveals the company’s current product lineup challenges. Model 3 Sedans and Model Y SUVs accounted for 97% of Q4 shipments, while deliveries of Model S, Model X, and Cybertrucks remained negligible. This concentration underscores Tesla’s vulnerability in an increasingly competitive landscape.

Industry Headwinds and Competitive Pressure

The deteriorating EV market reflects broader policy shifts and mounting competition. President Trump’s recently enacted legislative package eliminated the $7,500 federal EV tax credit – a major incentive that had driven consumer purchasing decisions. This regulatory pullback coincided with intensified global competition, particularly from Chinese manufacturer BYD, which recently surpassed Tesla as the world’s largest EV producer by market share.

Yet Investors Are Looking Elsewhere – The Robotaxi Thesis

Despite these challenges, market participants have largely dismissed the EV delivery concerns. This apparent disconnect stems from investor conviction in Tesla’s emerging business segments, particularly its autonomous vehicle fleet and humanoid robotics initiatives.

The Robotaxi Opportunity

Tesla’s robotaxi operations represent the focal point of bullish investor sentiment. The company soft-launched autonomous vehicles in Austin and San Francisco during 2024, marking a significant milestone in CEO Elon Musk’s long-stated vision. Management has signaled plans to expand into five additional cities in the coming months.

A critical development occurred in mid-December when Musk confirmed that certain Austin-based robotaxis had achieved fully autonomous operation without onboard supervision. This milestone, though limited in scope, suggested tangible progress toward the company’s autonomous driving ambitions.

Cost Advantages and Valuation Implications

Tesla’s purported manufacturing cost advantage represents a key pillar of the bullish case. According to Bloomberg analysis, Tesla can theoretically produce fully autonomous vehicles at significantly lower costs than established competitors like Waymo – a distinction that could prove transformative if realized at scale.

Analyst Dan Ives of Wedbush projects that Tesla robotaxis could operate across 30 cities by year-end 2026, potentially adding substantial enterprise value. Cathie Wood of ARK Invest, a vocal Tesla advocate, has established a $2,600 price target for 2029, implying massive upside from current levels near $450 per share. Wood’s analysis suggests robotaxis could comprise approximately 90% of Tesla’s enterprise value and earnings by 2029.

The Optimus Robot Wildcard

Beyond autonomous vehicles, Tesla’s Optimus humanoid robot project commands investor attention. Musk has previously indicated potential for scaled-up production during 2025, which could theoretically unlock significant value by automating household and commercial tasks. While promising, this business remains highly speculative and years away from meaningful revenue contribution.

The Valuation Reality Check

Tesla’s current $1.5 trillion market capitalization appears substantially premised on these future growth initiatives. However, the stock trades at over 200 times forward earnings – an extremely elevated multiple for a company still navigating uncertain timelines for robotaxi profitability and technological validation.

Skeptical investors must grapple with genuine uncertainties: Will Tesla successfully perfect autonomous driving technology? At what pace will consumers and regulators adopt self-driving vehicles? Can the company actually achieve the cost advantages theoretically available?

The Bottom Line

The bifurcation between Tesla’s struggling traditional EV business and soaring stock price reflects a market willing to overlook near-term operational challenges in pursuit of transformative long-term opportunities. However, the risk-reward calculus appears unfavorable at current valuation levels, particularly given execution uncertainties surrounding both robotaxis and humanoid robots. Investors should approach Tesla as a high-risk, speculative position rather than a core holding based on demonstrated business fundamentals.