Why Tesla stock outperformed the S&P 500 — again — in 2025

Tesla (NASDAQ:TSLA) was one of the stocks to outperform the S&P 500 in 2025. And that tells me a lot about what investors are thinking about the company right now.

The last 12 months have been hugely challenging for the business. But there have been some promising signs and the stock market seems to be convinced â for the time being.

Vehicle sales

Tesla shares climbed around 19% in 2025, but this wasnât because of higher sales and profits. Total revenues fell 3% during the first nine months and earnings per share were down 38%.

One reason for this was the removal of the green energy credits that had boosted the firmâs sales and profits. But the news on this front might not be entirely bad. When it comes to manufacturing electric vehicles, Teslaâs scale is unmatched. And that gives it a genuine cost advantage over the likes of Ford and General Motors that’s still intact.Â

That means itâs in a better position to cope with the phasing out of credits used to incentivise manufacturers and buyers. But there are other risks to consider on this front.Â The biggest threat to Tesla in terms of car sales probably isnât other US rivals â itâs companies based in China. And those companies are in a position to be competitive on price.

Long story short, itâs been a tough year for Teslaâs vehicle sales. But investors are willing â at least for the time being â to go along with the idea that it’s not really a car company.

Autonomy and robotics

The real excitement around Tesla stock in 2025 came from its autonomous vehicle division. The firm finally launched its robotaxi network, which now transports real passengers.

Vehicles currently have a human safety monitor in the car because the firm hasnât yet achieved Level 4 autonomy under local regulations. In that sense, itâs still behind Waymo.

If Tesla can get there though, it will have a huge cost advantage over Waymo because its driverless system is much cheaper to produce. And itâs closer now than it was a year ago.

This is what’s been pushing the stock higher. Thereâs an important sense in which the company could go from being behind to being miles in front almost overnight.

One area where thereâs less competition to contend with is robotics. Tesla missed production targets for its Optimus humanoid robot by a long way (roughly 1,000 vs 5,000). The company did however, make good progress with its technology. And that gives investors something else to focus on in 2026.

What will 2026 bring?

Tesla’s outperformed in 2025 because investors are looking past the current realities of car sales and focusing on the potential of automation. And that might well be justified. I think the stock in 2026 depends entirely on managementâs ability to keep them doing this. But that might be easier said than done.

A lot of shareholders say that Tesla isnât a car company. But they voted through a pay package for the CEO with a bonus thatâs activated by selling a certain number of cars.

The stock could definitely go higher in 2026 and Iâm not betting against it. In terms of an investment though, thereâs far too much optimism reflected in the share price for my liking.

The post Why Tesla stock outperformed the S&P 500 — again — in 2025 appeared first on The Motley Fool UK.

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Stephen Wright has positions in General Motors. The Motley Fool UK has recommended Tesla. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.