Tesla Inc. has recently faced significant challenges, resulting in a decline in its market capitalization. The company’s stock price has dropped over 8%, leading to a valuation below the $1 trillion mark, which is its lowest since early November 2024. This downturn has raised concerns among investors and affected the net worth of CEO Elon Musk.
Stock Performance and Market Concerns
Since the beginning of the year, Tesla’s stock value has decreased by 25%, contrasting sharply with the Nasdaq’s modest decline of 1.5%. Additionally, shares have fallen more than 35% from their record close on December 16, 2024. This decline has prompted investor worries about the company’s future performance.
Elon Musk has seen his net worth decrease by over $100 billion during this period, although he still holds the title of the richest person in the world with an estimated fortune of around $380 billion. The recent downturn in stock prices has been exacerbated by a disappointing report regarding Tesla’s long-awaited upgrade to its partially automated driving systems.
Competitive Environment and Challenges
The electric vehicle market is becoming increasingly competitive, particularly in China. Companies like BYD are offering partially automated driving systems at little to no cost, which poses a challenge for Tesla. For instance, Xiaomi’s SU7 model includes similar technology as a standard feature without additional charges, raising concerns among Tesla shareholders.
Moreover, Musk’s political activities have drawn scrutiny, especially his role in leading the Department of Government Efficiency in Washington, D.C. His significant workforce reductions in agencies overseeing his businesses, including Tesla, have raised eyebrows and led to protests against the company in various markets.
Impact of External Factors
The stock’s decline earlier this month was influenced by Trump’s announcement of extensive tariffs on goods from Canada, Mexico, and China. This coincided with a notable decrease in Tesla vehicle registrations across Europe in January and February. In the fourth quarter of 2024, Tesla reported earnings and sales figures that fell short of analysts’ expectations, with automotive revenue dropping by 8% year-over-year.
Additionally, a report indicated an 11.6% drop in sales in California during the fourth quarter of 2024. This is particularly concerning as California has historically been Tesla’s largest domestic market. The report highlighted that reduced average selling prices across Tesla’s aging lineup, including the Model 3, Model Y, Model S, and Model X, significantly contributed to the revenue decline.
Investor Sentiment and Future Outlook
Despite these setbacks, Tesla’s stock remains approximately 20% higher than its pre-election trading levels, largely due to a 15% surge the day after Trump’s election. Musk’s substantial financial support for Trump’s campaign, amounting to $290 million directed toward Republican candidates and causes in 2024, has also influenced investor sentiment.
As the market navigates these developments, the future trajectory of Tesla’s stock and its overall market position remains uncertain. Shareholders are closely monitoring both the company’s performance and Musk’s political activities, as these factors will play a crucial role in shaping Tesla’s future in the competitive electric vehicle landscape.
📎 Related coverage from: cnbc.com
