Investing.com -- Barclays (LON:BARC) analysts outline three critical themes poised to shape Tesla’s story in 2025, including a return to volume growth, expanding autonomous vehicle (AV) and artificial intelligence (AI) efforts, and increased contributions from non-automotive segments like energy and regulatory credits.
Tesla's (NASDAQ:TSLA) 2025 volume outlook is under scrutiny after 2024 marked its first year of year-over-year declines. Although Tesla had set a 20-30% growth target during its Q3 update, it remains uncertain whether this goal will be reaffirmed.
In its note, Barclays analysts highlighted several key volume drivers. This includes the upcoming new low-cost model, informally referred to as “Model 2.5.” However, its success is uncertain.
“To the extent Model 2.5 is merely some form of de-contented Model 3/Model Y, we suspect that a ramp could be swift, but we’re skeptical this would unlock substantial incremental demand,” analysts led by Dan Levy said.
Conversely, if it introduces a unique form factor, the ramp-up might face delays.
“M2.5 will likely be the biggest wildcard on '25 volume, yet questions on volume and its ramp cadence will likely remain outstanding for the time being,” analysts added.
Barclays projects Tesla's 2025 deliveries to reach 1.95 million units, reflecting a 9% year-over-year increase. However, this estimate falls significantly below Bloomberg's consensus of 2.08 million units and Tesla's earlier implied guidance range of 2.15–2.33 million units.
The second key theme for 2025 are Tesla’s AV and AI initiatives, with expectations for milestones in full self-driving (FSD) technology.
According to Barclays, Tesla believes it can achieve a “feature-complete” unsupervised FSD system in 2025, with intervention rates surpassing human drivers in select pilot areas.
Additionally, the automaker plans to launch its Robotaxi service in three US locations, marking a key step in commercializing its AV technology.
Yet, the analysts emphasize that the company’s advancements in these areas may be incremental rather than transformative, stating that Tesla must offer “breadcrumbs” of progress to sustain investor enthusiasm.
Lastly, Tesla’s non-vehicle segments, including energy storage and regulatory credits, are expected to play a pivotal role in boosting its earnings.
Barclays highlights the impressive growth trajectory in Tesla’s energy business, which saw a 113% year-over-year increase in deployments in 2024. For 2025, energy deployments are projected to grow by another 35%, aided by Tesla’s Shanghai Megapack facility.
Energy gross margins, which reached 31% in Q3 2024, are expected to slightly expand to 26.6% for the full year in 2025, despite potential headwinds from the Shanghai ramp-up.
Regulatory credits also remain an important contributor, with revenues forecasted to grow to $3 billion in 2025, up from $2.7 billion in 2024.
Analysts note that forecasting Tesla's regulatory credit revenues is difficult, due to their inconsistent contributions and unclear sources. However, they believe the majority of these revenues likely originate from Europe and the US where Tesla benefits from legacy automakers facing compliance challenges.
“While pooling/reg credit value per car in Europe is unknown, we believe Tesla will likely receive significant revenue per vehicle sale from pooling fees,” analysts said.
“Should pooling fees be lucrative enough, given other OEM challenges to sell enough EVs to reach compliance, we could see Tesla take aggressive pricing/incentive actions to generate more vehicle for pooling. This would benefit volume with potentially flat margin impact.”
While these themes underline Tesla’s growth potential, Barclays cautions that Tesla’s narrative has increasingly diverged from its fundamentals.
More concretely, it points out that the stock’s current valuation, at 123 times its 2025 price-to-earnings ratio, shows that the “Elon premium” is now at an all-time high.
“With Tesla reinforcing itself as the “OG meme stonk, we think Tesla's best comp is perhaps Bitcoin, and Elon's star power seems core to that,” analysts said, but they believe fundamentals “will eventually return to being important to Tesla investors.”