TMTPOST -- Tesla   Inc. stocks   closed 3.9% lower on   Tuesday, paring all their   gains over the past week. Shares retreated   after the electric vehicle ( EV )   behemoth was reported to halt part of production in Texas, in which it   plans   to roll out first robotaxi fleets   in   the world.

Credit：Tesla

  Tesla   told   employees   earlier this month   that it plans   to pause   production on Cybertruck   and Model Y   lines   at Gigafactory   Austin,   Business Insider learned   on Tuesday. The   pause will reportedly last for a week, starting from   June 30   to July 4.   It was reported that Tesla   said the temporary production pause, which   would be at least the third shutdown   during the past 12 months,   would enable the company   to perform maintenance   on production   lines and   help ramp up production.   It   didn ’ t specify outputs of which lines might   be   boosted following the   shutdown.

The shutdown came as   Tesla is gearing up its robotaxi launch in   Austin,   the   capital   city of the U.S. Texas   state   in which   the company ’ s headquarters was located. Tesla ’ s robotaxi service is   tentatively set to launch   in Austin   on June 22,   said   CEO   Elon   Musk   in a post on X    a week ago, adding that the date could   shift   due to the company ’ s "being super paranoid   about safety."   He   also said   in   the post on June 10   the first Tesla vehicle driveless trip   from its factory   to a customer ’ s house   will take   place   on   his   birthday, June 28.

Musk   last month told CNBC Tesla ’ s robotaxi service will start with   about   10   Model Y   vehicles   in Austin,   and these vehicles will be equipped with   a forthcoming version of FSD, or full self-driving, known as FSD Unsupervised.   Tesla will soon   expand   the service to thousands of   vehicle   should the launch   in Austin   go well with   no incidents. Musk at that   time confirmed   robotaxis   service   will hit   the streets of Austin   by the end of June.

Tesla   stocks on Tuesday   were weighed by a   negative   note   released by Wells Fargo, one of   the Wall Street ’ s biggest bears. Colin Langan, a senior equity analyst   at Wells Fargo   Securities, in the report believed Tesla ’ s fundamentals are going   to turn worse   than expected. The analyst   expected   Tesla ’ s deliveries for the second   quarter   of this year   to tumble 21%   year-over-year ( YoY ) to   343,000 units. The estimated volume was   around 17% below Wall Street   consensus.   "We recently flagged Q2 deliveries aren ’ t showing signs of recovery," said Langan.

Tesla has released the worst quarterly performance by delivery in almost three years. The company delivered 336,681 EVs for the first quarter of the year, hitting the lowest deliveries since the second quarter of 2022. That represented a 13%   YoY decline. Analyst previously expected Tesla ’ s deliveries would be between 360,000 and 370,000 units, according to StreetAccount.  

"New Model Y appears weak given inventory building & promotions. There is also no update on the affordable model, the only driver of 2H [ second half of the year ] volumes," Langan wrote in a note on   Tuesday. "Order px [ pricing ] is ~stable, though financing promos & inventory discounts continue. We expect lower margin q/q   [ quarter-over-quarter ]   due to px."

Langan expected   Tesla ’ s earnings and free   cash flow   ( FCF )   would   hit by   the   tumble in auto   deliveries,   in combination   with lower EV credits, pricing, tariffs   and steady capital expenditure ( CapEx ) . Regulatory   credits, Tesla ’ s   critical source of profitability, are under pressure owing to   U.S. President Donald Trump ’ s elimination of a waiver that allows California to regulate its air emission,   effectively   revoking   the Zero-Emisson   Vehicle   ( ZEV )   program in the state.  

"CARB ’ s end also implies >10% EBIT risk from ZEV credits,"   Langand and other   Wells Fargo analysts   said. They estimated ZEV credits account for roughly 50% of   Tesla ’ s   regulatory credit earnings.   Wells Fargo   now forecasts FCF   burn of $1.9 billion,   "the first   negative FCF   FY   since 2018", according to the   report.

Langan is also concerned about Tesla ’ s robotaxi testing in Austin. "The FSD testing in Austin seems to be w/in a limited range, at low speed & heavily supervised. We see a risk of ramping up too quickly as an accident would be a major setback," Langan said   in the note.

Langan maintained his   Underweight rating for   Tesla since   March   of   2024, and his price target   of $120   suggested   shares   of the EV   maker   would   fall more than 63% from their   close on Monday.