In a new research report, Bernstein analysts are pessimistic about Tesla.

Bernstein's analyst Tony Sacconaghi noted that Tesla's market share has been declining in all regions, both under electric vehicles (EVs) and under the other hybrid vehicles (xEVs) category.

The analyst noted that Tesla's share of the global xEV market has been steadily declining since 2019, from 17.5% at the time to 12% in the first half of 2024. Battery electric vehicle (BEV) market share has also declined significantly, from 28% in 2019 to 20% in 2024.

This decline is particularly pronounced in North America, where Tesla had an absolute 77% share of the North American all-electric vehicle market in 2019. However, as of the first half of 2024, that share has fallen to 48%.

“We believe that Tesla will not regain market share or achieve substantial growth unless it introduces new, lower-priced products, which may not be until 2026 and 2027.” Sacconaghi said, “We see a growing disconnect between the company's valuation and prevailing fundamentals.”

Tesla's declining market share is influenced by several factors. Increased competition in the electric vehicle market is one of the major factors contributing to Tesla's market share decline. Meanwhile, Tesla's average selling price (ASP) has declined by nearly 10% to 20% year-over-year.

Bernstein's report also noted that overall EV market growth has slowed, with pure EV sales growth being particularly sluggish. xEV markets worldwide grew 21% year-over-year in the first half of 2024, while BEV sales grew only 9%, a significant slowdown from previous years. Within xEVs, growth in plug-in hybrid electric vehicles (PHEVs) remained strong, soaring 49% over the same period. And all of this makes Tesla's growth prospects even bleaker.

Bernstein expects Tesla's growth to be minimal in 2024 and 2025. The analyst also mentioned that Tesla's auto business margins don't seem to have reached their lowest point yet.

The report notes that Tesla's short-term performance has been difficult to predict, a challenge exacerbated by the uncertainty surrounding the company's Robotaxi, which is set to be released in October. The analysts expressed skepticism about Tesla's success with Autopilot, noting that Musk's company “has a history of launching concepts that take years to release.”

They added: “As a result, we suspect that October's Robotaxi will focus on vision and lack deliverables, and could end up being a ‘sell the news’ event.”

“While we recognize that it may be difficult to short Tesla prior to the event, the stock is currently trading at more than 80 times our FY25 EPS estimate and we believe the long-term risk-reward is unfavorable,” the report reads.

Bernstein reiterated an “underperform” rating on Tesla with a $120 price target. By comparison, Tesla's shares closed at $216.12 on August 16th. That means Bernstein sees 44.5% downside for the stock.