Tesla (NASDAQ:TSLA) is expected to post strong third-quarter results, but analysts warn that the current momentum may not be sustainable as U.S. electric vehicle (EV) demand is set to drop sharply once tax incentives expire.
Barclays forecasts roughly 465,000 vehicle deliveries in Q3, surpassing the consensus of 430,000, bolstered by a surge in U.S. sales ahead of the $7,500 EV tax credit deadline.
“We believe we are in the midst of a flow of positive datapoints for Tesla – and likely supporting the stock’s recent strength,” analyst Dan Levy wrote.
Levy noted that a potential earnings beat could be fueled by this pre-purchase surge, as well as optimism around Tesla’s robotaxi plans and its annual shareholder meeting on November 6.
However, he emphasized that the apparent strength masks underlying weakness. The pre-buy effect is expected to depress fourth-quarter volumes, with U.S. sales likely to drop significantly.
Barclays kept its 2025 delivery projection at around 1.6 million units, representing a 10% year-on-year decline despite the third-quarter boost.
“While the 3Q beat will be appreciated, we believe investors may also look to the weaker expected volume outlook for 4Q and beyond,” Levy said.
Regionally, Tesla’s performance is uneven. Chinese deliveries are recovering sequentially but remain below last year’s levels, while European volumes continue to lag amid boycotts and reputational impacts linked to Elon Musk’s political activities.
In the U.S., deliveries are poised to rise about 9% year-on-year due to the pre-buy effect, although Tesla’s market share in the region has fallen to an eight-year low.
Rest-of-World (ROW) sales held up well in Q3, with record deliveries in countries such as South Korea and Turkey. Much of this strength came from delayed shipments of the refreshed Model Y, which reached these regions later in the quarter, Levy said.
Margins are expected to improve sequentially, supported by higher volumes, a favorable product mix, and reduced incentives, helping to offset pressures from tariffs and raw material costs.
Barclays anticipates third-quarter production of approximately 445,000 units, with inventories declining by about 20,000 vehicles.
Levy added that the upcoming launch of a lower-cost model could provide a boost, but the rollout is delayed and its similarity to the Model Y may limit near-term impact.
Overall, Levy sees Tesla’s short-term gains as driven by temporary factors rather than sustainable demand. Investors, he noted, are “riding the wave of favorable datapoints” for now, while the broader EV market faces a more challenging outlook.
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