Updated version 3 - Tesla's automotive business returns to a growth trajectory, deliveries exceed expectations

Updated share price data in paragraph 2, with additional details and background information

Anhata Rooprai/Akash Sriram

Reuters October 2 - Tesla (TSLA.O) is on track to end two straight years of sales declines after third-quarter deliveries released Friday exceeded Wall Street expectations, with a rebound in European markets helping the carmaker return to growth despite the absence of U.S. tax incentives.

The Austin, Texas-based company’s shares are down about a fifth so far this year, but surged more than 5% in early trading.

The data suggest that while investors are increasingly focused on CEO Elon Musk’s ambitions in artificial intelligence, robotaxis and humanoid robotics rather than just quarterly deliveries, Tesla’s core automotive business may be regaining momentum.

Although vehicle sales remain the biggest revenue source for the electric vehicle maker, its roughly $1.4 trillion market value largely depends on these longer-term goals.

"Strong results position Tesla for full-year delivery growth after two years of declines. I believe FSD (Full Self Driving) is a key differentiator that drives consumers to choose Tesla over rivals," said Seth Goldstein, senior equity analyst at Morningstar.

Tesla still needs to deliver another 311,448 vehicles to match last year’s total deliveries, a figure lower than any quarterly total since mid-2022.

In the United States, as the $7,500 federal tax credit for EV buyers (link) comes to an end in September 2025, the Musk-led firm expects sales to dip from last year’s record Q3 figures.

According to data compiled by Visible Alpha, Tesla delivered 486,532 vehicles from July to September, beating the average analyst estimate of 456,896 units.

Demand was robust at the start of the quarter, with CFO Vaibhav Taneja stating in July that Tesla wrapped up Q2 with “the largest order backlog (link) since 2023.”

Unlike earlier this year, analysts have revised up their full-year forecasts — deliveries are now expected to reach 1.82 million by 2026, an increase from the consensus view of 1.65 million in June.

Also on Friday, smaller rival Rivian RIVN.O reported third-quarter deliveries that beat expectations (link) and reaffirmed its annual delivery estimates. Tesla is set to release quarterly results after the U.S. market closes on October 21.

European market recovery

According to the European Automobile Manufacturers’ Association, after a slump in the European market last year—partly due to backlash over Musk’s political positions and partly due to competition from cheaper Chinese brands—new vehicle registrations in the EU surged about two-thirds year-over-year from January through August.

Tesla’s sales recovery in Europe accelerated in the third quarter (link), with strong registration growth in France and Denmark and broader gains in September, driven by government incentives, a low base last year, and rising consumer interest in EVs.

Analysts expect the phased rollout of the company's Full Self Driving (FSD) software in Europe—now approved in eight countries—to further boost sales.

Tesla’s robotaxi fleet remains smaller than Alphabet-owned GOOGL.O Waymo, which operates commercial services across several U.S. cities.

Tesla’s driverless ride-hailing service currently operates in Texas and Florida without in-car safety supervisors. Last month, the company added its Cybercab—a model designed specifically for robotaxi use—to the existing fleet in Austin.

(To facilitate non-English speakers, Reuters has automatically translated its reports into several other languages. Automated translation may be inaccurate or miss context, so Reuters does not guarantee the accuracy of automated translations, which are provided solely to assist readers. Reuters accepts no liability for any damage or loss arising from the use of automated translation features.)