It has been a rough stretch for Tesla. The once-dominant electric-car company has seen plummeting sales across multiple continents. It faces tough competition from an explosion of sophisticated electric-vehicle manufacturers in China. The Cybertruck, its only major model release in recent years, has been a flop. And Republicans’ One Big Beautiful Bill Act kills federal tax credits for EVs and kneecaps Tesla’s profitable business of selling emissions credits. Perhaps most worryingly for Tesla, a good portion of its customer base has come to loathe the company’s CEO, Elon Musk, especially after he helped bankroll President Donald Trump’s victory in November last year, then spearheaded DOGE, which was chaotically implemented and resulted in thousands of federal layoffs and the near-destruction of USAID among other consequences.

Musk has undoubtedly done damage to the company he fashioned into a powerhouse; his reputation is a major driver of Tesla’s weak sales. Yet Tesla’s board dearly wants him to be more involved, not less. Last week, it offered Musk a compensation package that would make the richest man on earth significantly richer if he hits a series of audacious sales and profit targets. So where does this all leave a pioneering company that has become as divisive as almost any in America? For insight on that question, I spoke with Garrett Nelson, a senior analyst at the investment firm CFRA Research, who specializes in the auto industry.

You were quite bullish on Tesla’s future just a few months ago, predicting that the company was well positioned for Trump’s tariffs and that it would be a big winner this year in the market generally. But you’ve been significantly more bearish recently. A couple weeks ago, you said there would be no upside for Tesla’s stock in the next 12 months or so. What has changed in the interim?
I think the biggest thing is the bill that was passed on July 4 and the implications for Tesla with the federal tax credits going away. Even more significantly for them, it’s the change to the CAFE standards — the federal fuel standards. This has been a very significant bottom-line driver for the company for years. It was about $2.8 billion in revenue last year, up 54 percent over the year before. It’s been a very fast-growing and extremely high-margin revenue source because there’s no cost associated with it — it’s just them selling emissions credits to other automakers who haven’t met the same standards under the corporate average fuel economy.

The National Highway Transportation Safety Administration immediately stopped issuing noncompliance letters for violating that as soon as the bill was signed into law, so the revenue stream will be going away. And when I look at earnings and the trajectory of where I think estimates are going, it........

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