Gene Munster explains why Tesla’s demand is staying strong

Tesla posted a second‑quarter delivery total of 480,126 vehicles, a 25% year‑over‑year increase and 34% above the prior quarter, beating the Street’s 406,000 estimate [4]. Gene Munster of Deepwater Asset Management argues the surge reflects genuine demand, not just a one‑off boost from incentives or hype.

Delivery surge and its drivers

Munster points to three factors behind the “monster” delivery number. First, high gasoline prices—$4.21 per gallon, up 33% from a year earlier—have nudged cost‑conscious consumers toward electric cars [4]. Second, the expiration of the U.S. EV tax credit in September 2025 removed a temporary demand boost, so the current growth reflects underlying demand rather than incentive‑driven sales [2]. Third, the market’s perception that the “EV winter” that began in March 2024 is ending, a view reinforced by the delivery beat [4].

Competitive landscape

Legacy automakers such as Ford, GM, Toyota, Honda and Stellantis have scaled back EV investments, shifting focus to hybrids or internal‑combustion models [2]. Their reduced spending leaves Tesla with a wider runway in the United States, especially since Chinese EV maker BYD has no U.S. presence [2]. Munster notes that even without the Model S and Model X—both discontinued this quarter—the on‑a‑like growth would be about 27%, the strongest quarterly YoY increase since September 2023 [4].

Role of Full Self‑Driving (FSD)

Beyond vehicle sales, Munster highlights Tesla’s Full Self‑Driving software as a growth engine. FSD subscriptions reached 1.28 million in Q1, and regulatory approvals in the Netherlands and pending EU clearance could lift adoption and vehicle demand [3]. He suggests that monetizing FSD, rather than raw deliveries, will be the primary driver of Tesla’s valuation moving forward.

What to watch

• Q3 delivery outlook – Street forecasts project an 8% YoY decline for the next quarter; actual numbers will test whether the current demand tailwind persists.
• FSD regulatory progress – EU‑wide clearance expected in Q2 and China rollout in Q3 could accelerate subscription growth.
• Legacy automaker EV plans – Any reversal of recent EV investment cuts by Ford, GM or others would reshape the competitive balance.

The strong Q2 numbers show Tesla can sustain growth even as tax incentives fade and competitors pull back, but the durability of the demand surge hinges on external factors such as fuel prices and the rollout of autonomous‑driving features.