Baird Downgrades Tesla to Neutral Amid Robotaxi Uncertainty and Musk’s Political Risk

Tesla (NASDAQ:TSLA) faced renewed pressure early Tuesday after Baird analysts downgraded the stock to Neutral, citing significant near-term uncertainty, including overly optimistic expectations for its robotaxi program and brand risks tied to Elon Musk's political associations.

The stock dropped 1.8% in pre-market trading, as Baird's cautious stance pulled attention away from the recent 24% rally that followed what was, fundamentally, a weak quarter.

“Lofty Expectations” and Key-Person Risk

According to the research note, Baird believes Tesla's valuation has run ahead of its fundamentals. The brokerage highlighted that investor optimism around the June launch of a lower-cost vehicle and robotaxi service is already priced into the stock. However, the reality may not live up to the hype.

Key concerns include:

• Musk's growing political involvement, which now includes links to Donald Trump, a factor Baird warns may damage the Tesla brand.

• Key-person risk, which adds unpredictability to Tesla's leadership narrative.

• Rising competition in the autonomous vehicle space, which could limit Tesla's robotaxi ambitions.

Robotaxi Reality Check

While Elon Musk has promised “hundreds of thousands of robotaxis” on the road by the second half of next year, Baird's model projects just 6,000 units—a dramatic gap that underscores execution challenges and regulatory complexity.

Baird adds:

“Robotaxi expectations are high, and competition is intensifying. The business will likely be harder and less profitable than many investors expect.”

Revised Delivery Forecasts

In line with a more cautious tone, Baird also trimmed its delivery outlook:

• Q2 2025: 377,000 units (vs consensus 404,800)

• FY2025: 1.72 million units (vs consensus 1.70 million)

• FY2026: 2.19 million units (vs consensus 2.06 million)

The brokerage attributes this adjustment partly to the removal of EV tax credits, which could affect buyer sentiment and affordability.

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To stay updated on rating changes like Baird's Tesla downgrade, monitor real-time insights using the Up/Down Grades by Company API. It allows investors to track when firms issue new analyst ratings across major public companies—an essential signal for institutional and retail investors alike.

Long-Term View Intact

Despite the downgrade, Baird hasn't abandoned Tesla entirely.
They reaffirmed Tesla as a “core holding” for the long-term, especially due to its potential in robotics and autonomous mobility. However, they're “stepping to the sidelines for now” until the narrative better aligns with the delivery pipeline and brand clarity.