HSBC Downgrades Tesla to "Reduce," Cautious on Sales Surge and Model Lineup.

HSBC analyst Michael Tyndall reiterated a "Reduce" rating on Tesla (TSLA) with a $120 price target, citing concerns over the sustainability of Tesla's delivery pace, increasing competition, and the absence of a promised affordable model. Despite Q2 volumes increasing 14% QoQ, Tyndall believes the June run rate is unlikely to become the new normal.

In a significant development, Tesla’s Q2 2025 deliveries plunged 13.5% to 384,122 vehicles, falling short of market expectations and signaling mounting pressure from global competitors [1]. This marks a record quarterly drop for the electric vehicle (EV) giant, which has historically dominated the EV market.

Tesla’s stock price has been resilient despite the sales slowdown and a public dispute between CEO Elon Musk and U.S. President Donald Trump. However, the company’s core product, electric cars, has seen slowing sales. Meanwhile, Tesla’s attention is increasingly divided among parallel ventures such as solar energy, battery storage, humanoid robots, and robotaxis.

The EV market has become crowded, with Tesla’s share of the U.S. market falling from 75% in Q1 2022 to 43.5% in early 2025. General Motors (GM) has emerged as a significant competitor, offering a wide range of EVs under well-known brands like Cadillac, Chevrolet, GMC Hummer, and Buick [1]. Chinese automaker BYD overtook Tesla in 2024, securing 22.2% of the global EV market compared to Tesla’s 10.3% [1].

Tesla’s solar business, which includes solar panels and battery storage systems, continues to grow. However, this expansion brings logistical challenges, particularly for lithium-ion batteries and critical solar components [1]. The company’s vertical integration aims to mitigate some risks, but these efforts are resource-intensive and vulnerable to regional regulations and bottlenecks.

Tesla’s focus on autonomy and AI through its robotaxis and humanoid robots, Optimus, also pulls resources away from the EV business. The company’s new robotaxis, launched in June 2025, rely on in-vehicle cameras instead of radar and LiDAR systems, raising concerns about safety [1]. The US National Highway Traffic Safety Administration is monitoring these trials, and the AI systems powering these innovations are under pressure from Tesla’s existing product lines.

HSBC analyst Michael Tyndall reiterated a "Reduce" rating on Tesla (TSLA) with a $120 price target, citing concerns over the sustainability of Tesla’s delivery pace, increasing competition, and the absence of a promised affordable model. Despite Q2 volumes increasing 14% QoQ, Tyndall believes the June run rate is unlikely to become the new normal [2].

References:
[1] https://supplychaindigital.com/news/are-the-days-of-tesla-ev-sales-domination-over
[2] https://www.benzinga.com/news/politics/25/07/46300946/musk-vs-trump-soap-opera-must-end-tesla-analyst-shares-3-key-steps