"When it comes to auto production, Elon may have fallen in love with the wrong thing. He's fallen in love with robots and automation," Max Warburton, European autos analyst at Bernstein, said in a Wednesday report.
"There is a body of academic and practitioner research on" how automation is often contrary to the principles of lean production, Warburton said. "It appears [as] though Tesla has chosen to ignore it. Or perhaps Tesla is convinced it's out of date, in an age of better sensors and computers."
Tesla shares fell nearly 7.7 percent Wednesday, off more than 30 percent from its record high hit in September. The stock has tumbled 14.5 percent this week following an investigation into a fatal Tesla crash and Moody's downgrade of the electric car maker's credit rating.
The price on Tesla's junk bond, which matures in 2025, also fell to its lowest since the debt offering in August and short sellers have piled in amid growing worries about the company's ability to deliver on its production goals.
Tesla has burned through billions of dollars while it struggles to deliver on many promises. The company initially set a 5,000-a-week production target for the Model 3 by the end of 2017, but has since pushed that goal out by half a year.
"If Tesla fails to ramp [production], or finds demand is lower than anticipated, or struggles to make money on the product and/or runs into overall financial difficulty," Warburton said, "then it will be perceived as a positive development for its European competitors."
His top picks in the European auto sector are Volkswagen, PSA and Valeo.
Bernstein's Tesla analyst, Toni Sacconaghi, said the firm rates Tesla market perform with a price target of $265, or 2.8 percent above Wednesday's close.