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Is Tesla's Rising Capital Spending Putting Strain on Cash Flows?
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Key Takeaways
{\"0\":\"Tesla\'s operating cash flow dropped to $2.5B in Q2 2025 from $3.6B a year earlier.\",\"1\":\"Free cash flow fell to $146M as capital expenditure rose to $2.4B in the quarter.\",\"2\":\"Automotive revenues declined 16% year over year, with energy revenues also down.\"}
Tesla, Inc.’s (TSLA - Free Report) operating cash flows have declined to $2.5 billion in the second quarter of 2025, down from $3.6 billion in the second quarter of 2024. Consequently, the company’s free cash flow has fallen to $146 million from $1.34 billion recorded in the year-ago period. However, its capital expenditure continues to trend upward and reached $2.4 billion in the second quarter, up from $2.3 billion in the second quarter of 2024 as the automaker continues to make investments in manufacturing projects such as the Cybercab, Semi line, other production initiatives and the expansion of its AI programs.
Despite heavy capital investments, Tesla's efforts have so far not translated into revenue growth. In the second quarter, its total automotive revenues declined nearly 16% year over year. Whereas its energy generation and storage revenues, which once followed an uptrend, have also started declining. The company attributes the year-over-year decline to the negative impacts of the bill and tariffs. However, lower-than-expected demand for EVs and the political stances of CEO Elon Musk are often considered the prime suspects behind the automaker’s deteriorating performance.
With the end of U.S. tax credits and potential price cuts, higher capital spending will pressure Tesla’s near-term free cash flow. However, the company expects the impact to ease once autonomy scales, which could significantly strengthen cash flow in the second half of next year. TSLA carries a Zacks Rank #4 (Sell) at present.
Ford Motor Company (F - Free Report) reported net cash operating activities of $6.3 billion in the second quarter of 2025, up from $5.5 billion reported in the second quarter of 2024. Its adjusted free cash flow totaled $2.8 billion compared with $3.2 billion in the year-ago quarter. In 2025, Ford aims to generate $3.5-$4.5 billion in adjusted free cash flow.
General Motors Company’s (GM - Free Report) automotive operating cash flow totaled $4.6 billion in the second quarter of 2025, down from $7.7 billion reported in the second quarter of 2024. Its adjusted automotive free cash flow totaled $2.8 billion, down from $5.3 billion in the year-ago quarter. For full-year 2025, General Motors expects to generate adjusted automotive free cash flow of $7.5-$10 billion in adjusted free cash flow.
Tesla’s Price Performance, Valuation and Estimates
Tesla has underperformed the Zacks Automotive – Domestic industry and the Auto, Tires and Truck sector year to date. Tesla has gained 3.2% compared with the industry’s growth of 4.6%, respectively.
Image Source: Zacks Investment Research
From a valuation perspective, Tesla appears overvalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 12.82, higher than its industry’s 3.18.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2025 and 2026 EPS has moved down 11 cents and 19 cents, respectively, in the past 60 days.
Image Source: Zacks Investment Research
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Is Tesla's Rising Capital Spending Putting Strain on Cash Flows?
Key Takeaways
Tesla, Inc.’s (TSLA - Free Report) operating cash flows have declined to $2.5 billion in the second quarter of 2025, down from $3.6 billion in the second quarter of 2024. Consequently, the company’s free cash flow has fallen to $146 million from $1.34 billion recorded in the year-ago period. However, its capital expenditure continues to trend upward and reached $2.4 billion in the second quarter, up from $2.3 billion in the second quarter of 2024 as the automaker continues to make investments in manufacturing projects such as the Cybercab, Semi line, other production initiatives and the expansion of its AI programs.
Despite heavy capital investments, Tesla's efforts have so far not translated into revenue growth. In the second quarter, its total automotive revenues declined nearly 16% year over year. Whereas its energy generation and storage revenues, which once followed an uptrend, have also started declining. The company attributes the year-over-year decline to the negative impacts of the bill and tariffs. However, lower-than-expected demand for EVs and the political stances of CEO Elon Musk are often considered the prime suspects behind the automaker’s deteriorating performance.
With the end of U.S. tax credits and potential price cuts, higher capital spending will pressure Tesla’s near-term free cash flow. However, the company expects the impact to ease once autonomy scales, which could significantly strengthen cash flow in the second half of next year. TSLA carries a Zacks Rank #4 (Sell) at present.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Cash Flows of Tesla’s Rival
Ford Motor Company (F - Free Report) reported net cash operating activities of $6.3 billion in the second quarter of 2025, up from $5.5 billion reported in the second quarter of 2024. Its adjusted free cash flow totaled $2.8 billion compared with $3.2 billion in the year-ago quarter. In 2025, Ford aims to generate $3.5-$4.5 billion in adjusted free cash flow.
General Motors Company’s (GM - Free Report) automotive operating cash flow totaled $4.6 billion in the second quarter of 2025, down from $7.7 billion reported in the second quarter of 2024. Its adjusted automotive free cash flow totaled $2.8 billion, down from $5.3 billion in the year-ago quarter. For full-year 2025, General Motors expects to generate adjusted automotive free cash flow of $7.5-$10 billion in adjusted free cash flow.
Tesla’s Price Performance, Valuation and Estimates
Tesla has underperformed the Zacks Automotive – Domestic industry and the Auto, Tires and Truck sector year to date. Tesla has gained 3.2% compared with the industry’s growth of 4.6%, respectively.
Image Source: Zacks Investment Research
From a valuation perspective, Tesla appears overvalued. Going by its price/sales ratio, the company is trading at a forward sales multiple of 12.82, higher than its industry’s 3.18.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2025 and 2026 EPS has moved down 11 cents and 19 cents, respectively, in the past 60 days.
Image Source: Zacks Investment Research