* Analysts halve 2026 delivery growth forecast to 3.8%

from 8.2% in January

* Morningstar, Morgan Stanley among analysts predicting a

fall

* Tesla's cash flow expected to turn negative amid high

capital expenditures

* Tesla faces competition, tax credit loss and weak

demand for affordable variants

By Abhirup Roy and Akash Sriram

SAN FRANCISCO, March 11 (Reuters) - Tesla

investors and analysts are cutting estimates for its electric

vehicle deliveries and some are now expecting a third straight

year of decline, pressuring profit as CEO Elon Musk refocuses on

the expensive goals of launching robotaxis and humanoid robots.

Wall Street has expected Tesla to break its losing streak of

declining car sales in 2026, but that is changing fast. Analysts

have more than halved their growth forecast to about 3.8% from

8.2% in January and some high-profile Tesla watchers, including

Morgan Stanley and Morningstar, which now project declines.

The shift comes as Tesla plans to double its capital

expenditures to over $20 billion, and Wall Street now expects

that Tesla will be spending more cash than it takes in, a switch

from seven years of positive cash flow.

Tesla is hit by the loss of U.S. EV tax credits and tougher

competition in Europe, where it still lacks approval for its

self-driving software, Morningstar analyst Seth Goldstein said,

estimating a nearly 5% drop in vehicle deliveries this year.

"If I look at two of the three largest markets, I'm seeing a

decline," Goldstein said. "So globally, I'm forecasting a third

straight year of deliveries decline in 2026."

Expectations for deliveries in 2026 have been edging down

gradually over recent quarters, according to Visible Alpha data,

and recent months mark a clear shift, with some estimates

pointing to an outright decline.

Goldstein and others also cited as a key concern weak uptake

of Tesla's recently launched cheaper, stripped-down versions of

its best-selling models.

To be sure, investors see Tesla's future as bright because

of prospects for self-driving software, robotaxis and humanoid

robots, rather than the core car business.

In addition, the projected spending is not an immediate

threat to Tesla, which ended 2025 with $44.06 billion in cash,

cash equivalents and investments, and CFO Vaibhav Taneja said in

January that the company might look into funding its spending

through debt or other means after using internal resources.

PRESSURE ON MUSK INTENSIFIES

Still, falling auto sales increase pressure on Musk to

deliver fully autonomous driving software and robots, which

underpin Tesla's $1.5 trillion valuation as car sales still

account for most revenue.

Tesla struck a guarded tone in its latest shareholder

presentation in January, saying it was focused on "maximum

capacity utilization" and that deliveries would be affected by

aggregate demand, supply-chain readiness and allocation

decisions.

Since hitting an all-time high on December 22, Tesla shares

have dropped over 20%. Since then, the broader S&P 500 index

has fallen a little over 1% up to Tuesday's close.

DEMAND REVIVAL EFFORTS SEEN FALTERING

Tesla's deliveries fell for the first time in 2024 due to high

borrowing costs, an aging lineup and poor reception of its only

new model - the Cybertruck. The fall deepened in 2025 amid

backlash over Musk's political turn, embracing President Donald

Trump in the United States and Germany's far-right party, the

AfD.

Efforts to rekindle demand, including rolling out more

inexpensive, stripped-down variants of its Model Y SUV and Model

3 compact sedan, priced about $5,000 below their cheapest

predecessors, have so far fallen short of expectations, analysts

said.

The price cut was not enough to offset the lost EV tax

credits, said Sam Fiorani, vice president at research firm

AutoForecast Solutions.

"The updates to the Model 3 and Model Y were not radical

enough to grow all of its market share back in the face of a

range of distinctly styled and nicely featured competition," he

said.

Sales in Europe showed some early signs of stabilization last

month, but are still far from a recovery. Tesla's China-made

electric vehicle sales climbed for the fourth consecutive month

in February, as a favorable comparison from the prior year

offset the typical seasonal headwinds.

CASH FLOW CONCERNS MOUNT

After last year's sales drop, Tesla ceded its crown as the

world's top EV maker to China's BYD. Any further

decline could hurt its ability to self-fund Musk's ambitions

outside autos.

Analysts have also been steadily reducing their estimates

for Tesla's revenue from automotive sales in 2026 - they now

expect the company to generate about $72 billion, down from

nearly $138 billion they were expecting two years ago.

Substantial cash reserves and growth in energy and services

have offered some comfort, but Tesla's plans to double capital

expenditures this year have sparked cash-flow concerns.

While higher capital spending is needed for Tesla's

ambitions in autonomous vehicles, robotics and energy, the cash

burn could weigh on the stock and the company's valuation,

Morgan Stanley analyst Adam Jonas said in a note. Jonas expects

the company to burn over $8 billion in 2026.

Wall Street now expects a negative free cash flow of about

$5.19 billion on average, a sharp reversal from previous

expectations of generating $2.27 billion, according to LSEG

data.

But investors, focused on progress in sales of Tesla's

self-driving software and the rollout of robotaxis, will be

happy as long as the fall in vehicle deliveries does not

accelerate, said Tesla investor Gene Munster, a managing partner

at Deepwater Asset Management.

Zero growth is a "win" and a decline smaller than last year

is "neutral," he said. "If the decline quickens, that's a

problem."