Tesla, Wall Street’s sweetheart, is experiencing some serious headwinds at the beginning of 2025. The electric vehicle titan’s stock price has plummeted over 31% since the middle of December, while most of the other tech giants have remained steady. This sudden collapse is threatening to push Tesla to the fringes of the exclusive trillion-dollar company club, and the worst performer of the “Magnificent Seven” tech giants.
The company’s recent earnings reports have done little to shore up investor confidence. The fourth quarter of 2024 posted little growth, with total revenue increasing just 2%. Worse, Tesla’s car sales revenue actually fell 8%, primarily due to price reductions across their entire range of vehicles. The company’s profit for 2024 suffered an even larger blow, falling 53% to $7.09 billion.
Tesla Sales Plummet in Europe Amidst Political Concerns
Compounding Tesla’s woes is CEO Elon Musk’s growing entry into politics. Since Donald Trump’s return to the presidency, Musk has assumed a new position as head of the Department of Government Efficiency (DOGE), responsible for reducing federal spending. But Musk’s forays into politics haven’t stayed on American shores.
He recently caused a stir by supporting Germany’s far-right AfD party, even giving an interview to its leader before the February elections.
The effect of this political gamesmanship is beginning to manifest in Tesla’s European sales figures. January 2025 posted precipitous declines across the continent: Germany fell 59%, France 63%, and Spain a whopping 75%. Even in EV-friendly markets of Norway and Sweden, sales decreased by 38% and 44% respectively.
What’s most disconcerting is that these declines came in an expanding market, so Tesla is losing its competitive advantage.
Tesla’s Challenges and Future Outlook
While some analysts attribute the sales decline to customers waiting for the new Model Y, to be introduced in the first half of 2025, others point to potential reputational damage from Musk’s political activism. The growing polarizing public image of Tesla’s CEO might be pushing some customers to competing brands.
Still, it’s worth noting that Tesla’s stock remains more than 30% above its pre-Trump election highs. Yet the company’s rich valuation remains a source of concern. Tesla now trades 120 times its estimated 2025 earnings, while traditional automakers such as Toyota, Ford, and Volkswagen trade single-digit multiples. Such premium valuation leaves Tesla extremely vulnerable to any disappointments or setbacks.
Musk is optimistic about the future, promising an “epic” 2026 and “ridiculously good” 2027 and 2028. A key part of this optimistic vision is Tesla’s new autonomous car service, launching later this June in Austin, Texas. The company aims to roll out the service nationwide by 2026.
But Tesla is also facing other Trump trade policy-related challenges, in the form of tariffs on aluminum, steel, and Chinese imports. The company’s January sales in China declined 11.5% from last year, while local rival BYD reported a 47.5% sales increase.
While all this is going on, Musk appears to be diluting his focus even further. In addition to his government position and various ongoing ventures (including xAI, X.com, Neuralink, SpaceX, and The Boring Company), he’s now going after a huge $100 billion OpenAI takeover.
As Tesla struggles through these troubled waters, investors and industry watchers are sitting tight to determine if the company can continue to be a dominant player in the car world while its CEO has multiple hats to wear and polarizing political views.
