Tesla: European Deliveries Plummet in January

Key Morningstar Metrics for Tesla

• Fair Value Estimate: $250.00
• Morningstar Rating: ★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: Very High

Tesla’s TSLA January deliveries in Europe fell to nearly half the level of January 2024, according to the European Automobile Manufacturers’ Association. This sent the firm’s shares down 8% during Feb. 25 intraday trading.

Why it matters: Tesla’s deliveries fell for the first time in 2024. A slow start in January could mean Tesla is off track to meet management’s guidance for delivery growth in 2025.

• Lower deliveries reduce Tesla’s total addressable market for ancillary products and services. These include autonomous driving software, charging, and insurance in select US states.

The bottom line: We maintain our fair value estimate of $250 per share. January European deliveries typically represent less than 1% of Tesla’s total annual global deliveries. A down month increases the risk that the company will not achieve growth in 2025, but we still think its goal is reachable.

• We view the stock as overvalued, trading more than 20% above our fair value estimate. We recommend investors wait for shares to offer a margin of safety before considering an entry point.

Coming up: We see two key events for Tesla’s deliveries this year:

• The refreshed Model Y will be sold in Tesla’s three key auto markets—the US, China, and Europe—later this year. Additionally, the firm plans to begin production of a more affordable SUV. These events should boost deliveries.
• The firm will launch its full self-driving unsupervised software (a Level 3 autonomous driving service), while testing its robotaxi in Austin, Texas, in June. We think the robotaxis will enter service by 2028, a couple of years after management’s timeline for 2026. This is consistent with the timeline of other Tesla product launches.