Tesla Downgraded by William Blair to Market Perform from Outperform

Tesla Downgraded by William Blair to Market Perform from Outperform

William Blair, a prominent investment research firm, has downgraded Tesla (NASDAQ:TSLA) from an Outperform rating to Market Perform. The decision was based on several factors, including changes in electric vehicle (EV) tax credits and incentives, as well as the potential impact of the Trump administration's "Big, Beautiful Bill" (BBB).

The primary concern cited by William Blair analyst Jed Dorsheimer is the elimination of the $7,500 tax credit for the purchase or lease of a new electric vehicle [1]. While this change was anticipated, the surprise elimination of corporate average fuel economy (CAFE) fines is seen as a more significant threat to Tesla's profitability. These fines, which Tesla has been earning substantial revenue from, are now effectively gone, with analysts estimating that about 75% of those revenues were tied to CAFE standards [2].

The loss of tax credits and the elimination of CAFE fines are expected to cause a short-term increase in unit volumes as consumers rush to buy before the incentives expire, but this could lead to a decrease in fourth-quarter sales and margins due to lower factory utilization and pricing concessions [2]. Additionally, investor concerns have been raised about Elon Musk’s political involvement, specifically the launch of the America Party, which some analysts believe may be a distraction at a critical juncture for the company [2].

On the valuation front, Tesla shares currently trade at 76 times William Blair’s reduced 2026 EBITDA estimate, compared to a peer group range of 20 to 25 times [2]. The firm sees the current multiple premium as vulnerable and expects the BBB to trigger a broader reset of Street estimates. After the reset, William Blair anticipates more data points on the robotaxi rollout to rebuild investor confidence.

Tesla shares fell more than 6% in premarket trading on Monday following the announcement of the America Party and the downgrade by William Blair [2].

References:
[1] https://seekingalpha.com/news/4465551-tesla-is-downgraded-by-william-blair-due-to-changes-in-ev-tax-credits-and-incentives
[2] https://www.investing.com/news/stock-market-news/william-blair-cuts-tesla-rating-as-trumps-new-bill-might-be-too-much-for-shares-4124239