Is Tesla at risk of negative free cash flow in 2025?

Wells Fargo warned on Tuesday that Tesla’s (NASDAQ:TSLA) fundamentals are coming in worse than expected for Q2.

Analyst Colin Langan warned that deliveries look flat vs. a weak Q1. June will need a >50% month-over-month jump in deliveries to meet the consensus deliveries estimate of 411K, he noted. The firm now expects full-year Tesla (NASDAQ:TSLA) deliveries to be down 21% year-over-year.

As for the bottom line, Langan and his team anticipate lower leverage on deliveries will impede Tesla’s (TSLA) margin rates. In addition, the firm pointed to risk to EBIT due to diminished ZEV credits. “Juxtaposing lower margins & potential WC headwinds w/ >$11B capex investment guide risks negative 2025 FCF,” warned Langan.

The cautious view on Tesla (TSLA) also factors in that there has been no update on the highly anticipated affordable EV model, which has been labeled by bulls as a game changer and driver of second half volume.

While Tesla (TSLA) CEO Elon Musk has not expressed concern, Wells Fargo thinks that automakers no longer needing to buy ZEV credits from Tesla (TSLA) is also a clear negative that will impact EBIT.

Finally, Wells Fargo thinks there are potential robotaxi headwinds in the mix.

“The FSD testing in Austin seems to be w/in a limited range, at low speed & heavily supervised. We see a risk of ramping up too quickly as an accident would be a major setback,” wrote Langan.

On Seeking Alpha, analyst Daniel Jones thinks things are going poorly for Tesla (TSLA). “Market share is shrinking across the board. Competitive pressures have proven harmful for the company. Inflationary pressures and tariffs also pose risks. The moves by Elon Musk in the political arena have clearly alienated those most likely to buy electric vehicles,” he highlighted.

Shares of Tesla (TSLA) were down 1.9% in early trading on Tuesday.