Tesla Vehicle Delivery Trends Are Concerning, and Shares May Be Overvalued

Tesla (TSLA 0.15%) stock is off to a stumbling start in 2025. At the time of this writing, shares are down nearly 2% year to date. The pullback is due to the company's latest vehicle delivery numbers spooking some investors. The automaker said it delivered nearly 496,000 vehicles in the fourth quarter, up only 2% year over year. Even worse, the quarterly delivery figure put total deliveries for the year at about 1.789 million units, down from approximately 1.81 million in 2023. A year of underwhelming growth -- particularly during a time when interest rates moved higher -- wouldn't be too concerning if it weren't for the stock's pricey valuation. But a high valuation demands rapid growth, and Tesla isn't delivering. Slowing growth Adding to the bearish narrative for Tesla stock in 2025, the company's quarterly year-over-year growth rate in vehicle deliveries actually declined during Q4. Tesla's 2% growth rate was about 4 percentage points lower than the 6% growth the company posted in Q3. Further, the quarterly delivery number Tesla reported was below the consensus analyst forecast for the period. On average, analysts were expecting Tesla to deliver about 9,000 more units than it did. "One trend which we observed in the industry [is] that, because of the affordability being impacted because of interest rates, people are holding on to the cars longer," explained Tesla Chief Fnancial Officer Vaibhav Taneja during the company's third-quarter earnings call last October, "especially in the U.S." Of course, the upside to the current demand situation is that if interest rates decline, there could be "a massive effect on the automotive demand," Tesla CEO Elon Musk told investors during the same earnings call. Tesla is between "growth waves" In addition to interest rates being a headwind, Tesla says there's a temporary self-inflicted structural problem affecting sales trends. In its third-quarter letter to shareholders, Tesla said the company is "currently between two major growth waves," with the first being the expansion of its Model 3 and Y vehicles and the second expected to "be initiated by advances in autonomy and introduction of new products, including those built on our next-generation vehicle platform." But investors shouldn't get too excited about this second growth wave. First, it's impossible to accurately predict its timing or how significant and profitable it will be. Second, this growth wave may already be priced in. Tesla currently trades at a price-to-earnings ratio of more than 110. Therefore, the stock is arguably already priced for declining interest rates and successful execution in unpredictable growth markets. To be fair, Tesla is executing quite well in some growth areas. For instance, the company's energy storage business is booming. It deployed 6.9 gigawatt hours (GWh) worth of energy storage in Q3, up 75% year over year. And this figure rose to a record 11 GWh in Q4. But Tesla's energy generation and storage business is still a small part of its overall business, representing about 9% of quarterly revenue. Further, it's not like Tesla is resting on its laurels when it comes to its ambitions for autonomous driving. Its supervised "self-driving" software has seen more than 2 billion miles of use as of the end of Q3. If Tesla can transition this software to an unsupervised version in the coming years, the company could roll out its planned autonomous driving robotaxi service, adding another revenue stream. With good momentum in some important but fast-growing areas of its business, there's a chance that Tesla will end up living up to its current valuation. But if some unexpected challenges arise, like an interest rate increase or higher-than-anticipated costs associated with the company's plans for its next growth wave, it may be difficult for investors to earn meaningful returns in the coming years.