Investing.com -- Tesla’s regulatory credits, often dubbed “free money” for selling zero-emissions vehicles and reaping the rewards from lagging automakers, accounted for nearly all of its free cash flow last year. But with the Trump administration moving fast to unwind federal support for the EV and battery business, is this cash cow finally at risk?

Not so fast, Piper Sandler analysts said in a recent note. They forecast that Tesla Inc (NASDAQ: TSLA) will still sustain its run-rate on automotive regulatory credits and the government new rules will likely take time to implement.

“We think the answer is no, at least not in 2025. We think that while it’s true that the U.S. government is committed to rescinding financial support for the EV and battery industries, Tesla will still book around $3B in credits this year, followed by $2.3B in 2026,” the analysts said.

While $3B would represent a noticeable drop from the $3.5 billion Tesla booked last year, an amount that represented roughly 100% of the company’s 2024 free cash flow, it’s hardly a wipeout. The decline reflects Piper’s own reduction in 2026 estimates, not a collapse in the market for credits. “This latter figure represents a modest reduction vs. our previous expectation, but the analysis...illustrates why, in our view, there’s no need for drastic estimate revisions."

While the U.S. government’s reversal on EV support has rattled sentiment, the impact is likely to be overshadowed by more promising full self-driving headlines, the analysts suggest, pointing to new robo-taxi testing outside Austin, Texas, as evidence of Tesla’s evolving growth narrative.

“In our view, these favorable FSD-related developments are likely to overshadow any/all negative commentary arising from lower 2025/2026 estimates," they added.

For now, the analysts have left their $400 price target unchanged, even as their fiscal 2026 EPS estimate nudges down to $2.86 from $2.99, noting that the stock’s rich valuation remains firmly intact, underpinned by the Tesla’s efforts to lean harder into autonomy and AI in the years to come.