Analysts are forecasting mixed results for Tesla in the second half of 2025, with expectations of a boost in Q3 followed by a decline in Q4. While some analysts remain cautious, one expert from Wells Fargo, Colin Langan, has reiterated his ‘Underweight’ rating on Tesla’s stock, predicting a price target of $120 per share. According to Langan, Tesla is expected to report Q2 earnings per share (EPS) of just $0.2, significantly below the consensus of $0.41. 
This decline is attributed to a reduction in EV credits and lower margins in Tesla’s energy business.
Despite this, Langan anticipates that Tesla will see a 9.2% sequential growth in EV credits, reaching $650 million for Q2, up from $595 million in the previous quarter. However, margins in Tesla’s energy business are expected to shrink from 29% to 24% due to tariffs on Chinese imports. On a more positive note, Tesla’s automotive gross margin, excluding credits, is expected to recover slightly to 13%, following a dip to 12.5% in Q1, which was influenced by unusually high warranty costs.
The most significant point in Langan’s report is Tesla’s outlook in the wake of changes in federal tax credits for electric vehicles (EVs) and solar energy systems. With these credits set to expire by the end of the year, Langan predicts a short-term surge in demand for Tesla’s products in Q3, followed by a substantial drop in Q4. Langan expects Q3 deliveries to surpass 400,000 units, but this will be followed by a steep decline in Q4. He also notes that Tesla may need to reduce prices by approximately 4% in Q4 to offset the loss of tax credits, which could lead to a drop in margins.
Furthermore, the elimination of penalties for automakers failing to meet the federal Corporate Average Fuel Economy (CAFE) standards is expected to significantly impact Tesla’s regulatory credits. Langan predicts a sharp reduction in the sale of these credits, estimating a decline of $170 million from Q1 to Q2. By Q3, the loss of Zero Emission Vehicle (ZEV) credits could halve Tesla’s total income from regulatory credits, with only Greenhouse Gas (GHG) and European Union (EU) credits remaining. As a result, the value of these credits is expected to decrease, as the Environmental Protection Agency (EPA) continues to relax emissions requirements.
Lastly, Langan highlights the impact of tariffs on Tesla’s energy business. Tesla’s energy generation division relies heavily on lithium iron phosphate (LFP) batteries imported from China, which are subject to tariffs. These tariffs, which averaged around 70% in Q2 before dropping to 30%, are expected to squeeze margins in Tesla’s energy business, reducing them from 26% to just 15% by 2025.