Charged: Tesla warns could see ‘a few rough quarters’

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From the hotly-debated high-flier Tesla (TSLA), Wall Street’s newest darling Rivian (RIVN), traditional-stalwarts turned EV-upstarts GM (GM) and Ford (F) to the numerous SPAC-deal makers that have come public in this red-hot space, The Fly has you covered with “Charged,” a weekly recap of the top stories and expert calls in the sector.

Click here to check out Tesla’s recent Media Buzz Sentiment as measured by TipRanks.

RESULTS: Last week, Tesla reported Q2 adjusted EPS of 40c, in line with consensus, and Q2 revenue of $22.5B, slightly better than the expected $22.13B.

Tesla said that, “We have sufficient liquidity to fund our product roadmap, long-term capacity expansion plans and other expenses. Furthermore, we will manage the business such that we maintain a strong balance sheet during this uncertain period. It is difficult to measure the impacts of shifting global trade and fiscal policies on the automotive and energy supply chains, our cost structure and demand for durable goods and related services. While we are making prudent investments that will set up both our vehicle and energy businesses for growth, the actual results will depend on a variety of factors, including the broader macroeconomic environment, the rate of acceleration of our autonomy efforts and production ramp at our factories. While we continue to execute on innovations to reduce the cost of manufacturing and operations, over time, we expect our hardware-related profits to be accompanied by an acceleration of AI, software and fleet-based profits. Our focus remains on prudently growing our vehicle volumes in a capex efficient manner by using our existing vehicle production capacity before building new lines. Plans for new vehicles that will launch in 2025 remain on track, including initial production of a more affordable model in 1H25.”

Barclays says Tesla’s Q2 earnings came in-line with estimates, highlighted by strong gross margins, but its near-term fundamentals are weakened on tax credit expirations, tariffs, and reduced regulation credit sales. The “gulf” between the stock’s narrative and the company’s fundamentals has further widened, the firm told investors in a research note. Barclays believes Tesla shares are “increasingly disconnected from fundamentals.” While the company’s artificial intelligence narrative remains, the earnings call reminded investors that Tesla’s fundamentals “remain choppy” and are likely to deteriorate in the coming quarters, contends Barclays. It kept an Equal Weight rating on the shares with a $275 price target.

The near-term fundamental outlook for Tesla remains challenged, UBS tells investors in a research note. The firm, which has a Sell rating and $215 price target on the shares, says the company is facing the end of the $7.5k consumer EV credit in the U.S., which will likely be a drag on demand, the brand continues to have challenges in Europe and China remains competitive.

ROBOTAXI: Google’s (GOOGL) Waymo is operating over 250,000 paid rides per week across five U.S. cities while Tesla (TSLA) recently launched a limited robotaxi service in Austin and Amazon’s (AMZN) Zoox is expected to go live in Las Vegas later this year, Rafe Uddin and Tim Bradshaw of The Financial Times report. While the U.S. is moving ahead into the autonomous space, scaling these services beyond a few cities remains challenging. Companies need to prove their robotaxis are safe as well as securing tens of billions of dollars in capital investment. Additionally, margins in ride-hailing market are typically thin.

BATTERY COLLABORATION: QuantumScape (QS) announced it is expanding the strategic collaboration and licensing arrangement with PowerCo SE, the battery company of the Volkswagen Group (VWAGY), originally entered into in July 2024. The updated collaboration agreement is designed to accelerate the QSE-5 battery development pilot line in San Jose, marking a major step forward in the industrialization of solid-state battery technology. Under the terms, PowerCo will provide up to $131 million in new payments over the next two years upon the joint scale-up team achieving certain milestones. The first milestones have been achieved, and QS expects to begin receiving payments in 2025. These inflows are in addition to the previously announced $130 million that will be due to QS upon satisfactory technical progress and subsequent execution of the licensing agreement. The agreement enables PowerCo to engage earlier in QSE-5 production and automation efforts, advancing the ramp-up of QS’s pilot line. This is an essential step in scaling manufacturing and executing the technology transfer required to bring QSE-5 to global markets, while also enabling higher-volume prototype cell deliveries to PowerCo. This expansion will allow PowerCo the right under the licensing agreement to produce up to an additional 5 gigawatt-hours of QSE-5-based cells annually, including for customers outside the Volkswagen Group, and the right to license certain future QS technology.