Tesla’s Core Business Stalls as Future Promises Face Reality Check

Tesla finds itself at a precarious crossroads. The company’s towering market valuation continues to lean heavily on Elon Musk’s ambitious visions for artificial intelligence and robotaxis. However, this future-focused narrative is now colliding with a starkly different present: a crumbling core automotive operation. With vehicle sales declining, key government incentives expiring, and the loss of its top EV manufacturer crown to BYD, investors are confronting a critical question. Is the promise of tomorrow substantial enough to offset the tangible weaknesses of today?

Leadership Shake-Up and a Costly Retention Move

Internal tensions appear to be rising, as evidenced by a significant compensation package aimed at retaining key talent. Senior Vice President Tom Zhu was granted stock options valued at over $226 million, a move designed to secure his long-term commitment to the company. Market analysts interpret this as a costly but necessary defensive strategy. Zhu is one of the few remaining top executives, alongside Musk and CFO Vaibhav Taneja, officially listed as an “officer” with the U.S. Securities and Exchange Commission, highlighting a thinning of the senior leadership ranks.

A Distant Reality for the Robotaxi Dream

The company’s much-hyped pivot to AI and autonomy is facing a reality check, widening the gap between ambition and execution. The robotaxi service launched in Austin in June 2025 falls far short of the vision of a fully autonomous network. Currently, it operates only at two locations and still requires a human safety driver in every vehicle.

Tesla’s competitive lag in this sector is significant. While the company has yet to complete a single paid, fully autonomous ride, Alphabet’s subsidiary Waymo reported 14 million driverless journeys across five major metropolitan regions in 2025 alone. Further dampening sentiment are reports of eight accidents in Austin—despite the presence of human monitors—and ongoing investigations by the National Highway Traffic Safety Administration (NHTSA).

Should investors sell immediately? Or is it worth buying Tesla?

Declining Deliveries and a New Market Leader

The operational data paints a concerning picture. Tesla’s global vehicle deliveries for the fourth quarter of 2025 dropped by 16% compared to the previous quarter. This marks the second consecutive year of declining sales—a dramatic reversal for a firm once synonymous with 50% growth rates.

A primary catalyst for this downturn was the expiration of the $7,500 U.S. federal tax credit in October 2025, which triggered a severe demand shock. In the U.S., electric vehicle sales nearly halved between the third and fourth quarters. During this period, competitors surged ahead. Chinese rival BYD, with 2.26 million units sold, officially dethroned Tesla as the world’s largest electric vehicle manufacturer.

The Crucial Test Ahead

Trading at approximately $446 per share and sporting an extreme price-to-earnings (P/E) ratio of nearly 300, Tesla’s valuation leaves virtually no room for operational missteps. Analysts at Wolfe Research have already slashed their 2026 profit expectations well below market consensus, warning of compressed margins due to soaring AI-related expenditures.

All eyes are now on the planned April 2026 debut of the “Cybercab.” This launch is shaping up to be the ultimate litmus test. Tesla must demonstrate that its strategic shift toward AI and robotics can generate substantial real-world revenue before the erosion of its foundational auto business critically weakens the company’s financial footing.