Tesla’s share price decline is attributed to factors like decreasing sales, rising competition from BYD and others, and concerns over Elon Musk’s political stances.
Tesla’s stock performance has recently faced significant challenges, marked by a notable decline in share price. Several factors have contributed to this downturn, including decreasing sales in key markets, increasing competition, and concerns surrounding CEO Elon Musk’s political involvements.
Sales and Market Performance
In January, Tesla experienced a substantial drop in sales across Europe, the EFTA, and the UK, contrasting with the overall growth in electric car sales in the region. According to Acea, the European electric car market grew by more than a third, while Tesla’s sales fell by over 45% across the EU, EFTA, and the UK combined, and more than 50% within the EU alone. This decline follows a previous year where Tesla’s sales fell for the first time in over a decade, indicating a potential faltering in demand.
Specifically, in California, Tesla’s largest domestic market, sales decreased by 11.6% in the fourth quarter of 2024, according to the California New Car Dealers Association.
Competitive Landscape
Increased competition, particularly from Chinese manufacturer BYD, is a significant factor affecting Tesla’s sales. BYD offers standard features that often cost extra from other manufacturers, making them an attractive alternative for consumers. The rise of other EV makers in China, such as Xiaomi, which includes advanced driver-assistance systems as a standard option in its SU7 model, further intensifies the competition.
Elon Musk’s Political Involvement
Elon Musk’s political stances and activities have also influenced Tesla’s brand perception and, consequently, its stock performance. Some consumers, initially drawn to Tesla’s climate-conscious image, have become disillusioned by Musk’s support for political figures and causes, including his involvement in slashing US development funds. His support for controversial figures and parties has led to protests and boycotts, potentially impacting sales, particularly in markets like Germany, given its history.
Some Tesla owners have expressed their disapproval through various means, such as donating to charities to offset Musk’s activities, using “Anti-Elon” stickers on their cars, and calling for boycotts. Some companies are even halting Tesla purchases for their fleets.
Stock Performance and Financials
Tesla’s stock has experienced considerable volatility. Early in the year, the stock plummeted by 25%, contrasting sharply with the Nasdaq’s comparatively modest decline of 1.5%. From its record close on December 16, the stock slid more than 35%. This downturn has significantly impacted Musk’s net worth, although he remains among the world’s wealthiest individuals.
In the fourth quarter, Tesla reported earnings and sales that missed analysts’ estimates, with automotive revenue dropping 8% from a year earlier and operating income plummeting 23%. The company cited reduced average selling prices across its Model 3, Model Y, Model S, and Model X vehicles as a major reason for the decline.
Challenges with Automated Driving Systems
Reports have also highlighted issues with Tesla’s partially automated driving systems. A Reuters report indicated that the upgrade to Tesla’s automated driving systems left owners disappointed, with the “navigate on city streets” feature in China falling short of expectations. These issues add to the anxiety among Tesla shareholders.
Future Outlook
Analysts suggest that 2025 will be a significant year for Tesla, while Musk anticipates a tougher year and has hinted at an “epic” 2026. Tesla’s stock performance hinges on the introduction of new vehicles and technologies that can reignite growth and address the challenges posed by increasing competition and concerns related to Musk’s political activities.
Sources: https://www.bbc.co.uk/news/articles/cvgd9v3r69qo
https://www.theguardian.com/business/2025/feb/25/i-felt-nothing-but-disgust-tesla-owners-vent-their-anger-at-elon-musk
https://www.cnbc.com/2025/02/25/teslas-market-cap-sinks-below-1-trillion-as-stock-falls-more-than-9percent.html