Tesla's Q3 delivery numbers are impressive, but Wells Fargo warns: good days may be coming to an end

According to the Zhitong Finance APP, Wells Fargo published a research report stating that Tesla (TSLA.US) delivered significantly more vehicles in the third quarter of 2025 than market and institutional expectations. However, due to the expiration of the U.S. electric vehicle tax credit policy and subsequent demand pressures, Wells Fargo remains cautious about its short-term growth. The bank maintains a "reduce" rating on Tesla with a target price of $120, indicating that the stock has more than 70% downside potential in the future.

The delivery report shows that Tesla's total deliveries in Q3 reached 497,099 vehicles, which is 20.7% higher than Wells Fargo's own forecast of 412,000 vehicles and 12.2% above the market consensus expectation of 443,079 vehicles, achieving a 7% year-on-year growth and a 29% quarter-on-quarter growth.

Notably, Wells Fargo's calculations indicate that Tesla's Q3 inventory decreased by approximately 50,000 vehicles, and its deliveries in China, the European Union, and the U.S. markets fell by about 11% year-on-year in July and August. This suggests that the single-month delivery in September saw a year-on-year increase of over 20%, becoming a key driver for the overall Q3 deliveries.

In addition, Tesla's energy storage business also made significant progress, deploying 12.5 GWh of energy storage products in Q3, a notable increase from 9.6 GWh in Q2.

Despite the delivery data exceeding expectations, Tesla's stock price fell on the day the report was released, reflecting investors' concerns about its short-term growth potential. Wells Fargo's analysis pointed out that the Q3 delivery exceeded expectations mainly due to promotional incentives before the expiration of the policy, rather than natural demand growth.

Specifically, to hedge against the impact of the expiration of the U.S. electric vehicle tax credit policy, Tesla launched multiple incentive measures in Q3: offering discounts of up to $2,000 on Model Y/3 inventory vehicles in the U.S. market, providing 18 months of free supercharging service for Model 3 vehicles in the U.S. and Canada, as well as other supercharging packages. Additionally, Tesla introduced a $6,500 leasing subsidy to further enhance promotional efforts.

Price pressure is also evident, with Wells Fargo estimating that Tesla's average order price in Q3 slightly decreased quarter-on-quarter, with Model Y/3 pricing falling by 1%. The bank predicts that Q3 is likely to be Tesla's strongest quarter for deliveries in the near future, and to maintain delivery levels, the company will need to continue offering attractive incentive policies and discounts to offset the impact of the $7,500 tax credit expiration.

Based on its assessment of future demand and profit pressures, Wells Fargo has lowered its core performance expectations for Tesla in 2025: it expects total deliveries for the year to be around 1.48 million vehicles, a 13% year-on-year decline, significantly below the market consensus of 1.64 million vehicles. At the same time, it has reduced its 2025 earnings per share forecast to a level 29% lower than the market consensus, primarily due to concerns about weak Q4 deliveries, profit margin pressures, and declining regulatory credit income