Tesla (NAS: TSLA) reported first-quarter 2026 deliveries of 358,023 vehicles. Tesla shares were down 4% on April 2 as the market reacted to deliveries coming in below consensus estimates reported by Tesla.

Why it matters: Deliveries were up 6% in the first quarter year over year. Despite the growth, we forecast that Tesla will see 2026 deliveries fall slightly due to the US electric vehicle tax credit expiration. We point to Tesla’s strong third quarter last year; the third quarter of 2026 is where Tesla will likely see a decline in deliveries.

  • Additionally, Tesla’s autonomous driving software is not yet approved in the European Union. We view this as a differentiator for Tesla, so the lack of approval will likely weigh on deliveries. This is similar to what happened in China last year, where Tesla deliveries fell until autonomous driving was approved, then rose.

The bottom line: For now, we maintain our $400 fair value estimate for narrow-moat Tesla. At current prices, we view shares as fairly valued, with the stock trading around 10% below our fair value estimate and in 3-star territory.

  • We see progress on the robotaxi as the major driver for shares in 2026. Tesla plans to expand testing for its robotaxi ride-hailing service to seven new US cities in the first half of 2026. If the company is able to make progress on its testing, shares will likely rise.
  • We see offsetting effects on Tesla from the war in the Middle East. The supply shock driving crude oil and fuel prices higher should boost demand for electric vehicles, including Tesla. However, disrupted logistics and higher shipping rates may result in higher near-term unit production costs.

Coming up: Tesla plans to report earnings after market close on April 22. We hope to hear from management on its robotaxi progress. We also hope management will provide an update on the Optimus humanoid robot, which is the second pillar of the company’s real-world artificial intelligence strategy.

Tesla should see long-term profit growth from AI, Robotaxis, and Humanoid Robots

Tesla is one of the largest battery electric vehicle automakers in the world. In less than a decade, the firm went from a startup to a globally recognized luxury automaker with its Model S and Model X vehicles. Tesla competes in the entry-level luxury car and midsize crossover sport utility vehicle markets with its Model 3 and Model Y vehicles. It also sells a light truck—the Cybertruck—and a semi truck. Tesla plans to launch a robotaxi and a luxury sports car in the future.

Tesla aims to transition from primarily being an automaker to focusing on real world artificial intelligence. This includes self-driving software for use in its own vehicles and a ride-hailing service named robotaxi. The company is also working on developing humanoid robots for commercial and eventually consumer use.

To build its products, Tesla often goes upstream and controls much of its supply process. This includes lithium refining, battery design and manufacturing, and semiconductor design.

Tesla is attempting to take a larger share of its customers’ auto-related spending, which includes selling autonomous driving software on a subscription basis, insurance in a growing number of US states, and charging, where the company owns and operates over 8,000 fast charging stations globally.

For robotaxi, we expect autonomous vehicles, namely Tesla’s robotaxi and Alphabet’s Waymo, to make up 50% of ride-hailing rides in the US and Canada by 2030, as robotaxis are cheaper than human drivers. Tesla is currently in the testing phase of its robotaxi service and currently tests in Austin, Texas, and the Bay Area of California, with plans to expand to at least seven more cities in 2026. The company is moving through testing and plans to remove safety drivers in its robotaxis in the Austin area in the near future. Over time, we think Tesla will grow to become one of the largest ride-hailing providers in North America.

Tesla also sells solar panels and batteries to consumers and utilities. As the battery-based energy storage market expands, Tesla is well-positioned to grow accordingly.

Bulls say

  • Tesla has the potential to disrupt multiple industries with its technology for EVs, AVs, batteries, and humanoid robots.
  • Tesla’s full self-driving software should generate growing profits in the coming years as the technology continues to improve, leading to a robotaxi service, increased adoption by Tesla drivers.
  • Tesla’s humanoid robot will create shareholder value as its ability to perform multiple functions will transform manufacturing and be useful to consumers.

Bears say

  • Traditional automakers and new entrants are investing heavily in EV development, which will result in Tesla seeing a deceleration in sales growth and being forced to cut prices due to increased competition, eroding profit margins.
  • Tesla’s large investment into autonomous driving software will be value destructive as the robotaxi product will face delays and competition from Waymo, who already offers a robotaxi service.
  • Tesla CEO Elon Musk’s political activities will turn consumers away from buying a Tesla in key markets including the US and Europe, leading to lower sales and profits.

Get Morningstar insights in your inbox

Terms used in this article

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company’s future cash flows, resulting from our analysts’ independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn about finding different sources of moat, read this article by Mark LaMonica.