Tesla’s (TSLA) stock is facing a steep decline, with investors increasingly worried that CEO Elon Musk’s political involvement is negatively affecting the electric vehicle maker’s performance.
Weak early 2025 sales numbers have exacerbated concerns, contributing to a nearly 50% drop in Tesla’s market capitalization since December. The company’s struggles come as Musk doubles down on his political alliances, including a deepened relationship with U.S. President Donald Trump.
Tesla shares dropped over 9% trading below $240 at the time of this writing, down significantly from their December 18 high of $488.54. The stock has seen a 34% decline since February 20, a date coinciding with a peak in Google searches for “DOGE”—the Department of Government Efficiency, a controversial initiative led by Musk under the Trump administration. Investor anxiety over Tesla’s direction is mounting, especially as sales numbers fall and competition in the EV market grows fiercer.
The Robotaxi Pivot: Hype vs. Reality
For years, Musk has positioned Tesla as more than an automaker, touting its future dominance in artificial intelligence, robotaxis, and humanoid robotics. Despite these grand promises, Tesla’s core business remains electric vehicles, which account for nearly all its revenue but only a fraction of its stock value. Investors have largely bought into the vision of Tesla as an AI-driven mobility leader, but the recent sales slump and broader market headwinds are testing that optimism.
Musk’s decision to scrap the highly anticipated $25,000 Model 2 EV in favor of a robotaxi-focused strategy has divided analysts. While bullish investors argue that Tesla’s valuation is justified by future robotaxi and autonomous technology revenues, others see the pivot as a risky gamble. Tesla’s plans to deploy fare-collecting robotaxis in Texas by June are met with skepticism, as regulatory hurdles and safety concerns remain significant obstacles.
For years, Musk has positioned Tesla as more than an automaker, touting its future dominance in artificial intelligence, robotaxis, and humanoid robotics. Despite these grand promises, Tesla’s core business remains electric vehicles, which account for nearly all its revenue but only a fraction of its stock value. Investors have largely bought into the vision of Tesla as an AI-driven mobility leader, but the recent sales slump and broader market headwinds are testing that optimism.
Musk’s decision to scrap the highly anticipated $25,000 Model 2 EV in favor of a robotaxi-focused strategy has divided analysts. While bullish investors argue that Tesla’s valuation is justified by future robotaxi and autonomous technology revenues, others see the pivot as a risky gamble. Tesla’s plans to deploy fare-collecting robotaxis in Texas by June are met with skepticism, as regulatory hurdles and safety concerns remain significant obstacles.
Political Fallout and Market Backlash
Musk’s growing political entanglements are increasingly viewed as a liability for Tesla. His role as a senior advisor in the Trump administration has drawn protests, with activists targeting Tesla showrooms across major U.S. cities. Internationally, Tesla’s brand is also suffering. Sales in China fell 49% in February, while European markets have seen sharp declines—76% in Germany, 55% in Italy, and nearly 50% in Sweden—largely attributed to Musk’s alignment with far-right political movements.
Meanwhile, Trump’s stance on electric vehicles presents another challenge. Despite Musk’s financial and advisory support for Trump, the president has expressed opposition to EV subsidies, which have been crucial for Tesla’s bottom line. If these incentives are cut, Tesla’s pricing strategy and profit margins could take a further hit.
The Road Ahead: Can Tesla Rebound?
Despite mounting concerns, Tesla’s market capitalization remains among the highest in the auto industry. Analysts continue to debate whether the stock’s valuation is sustainable given its declining vehicle sales, increased competition from Chinese automakers like BYD, and the uncertain timeline for its autonomous vehicle ambitions.
UBS analyst Joseph Spak recently lowered his Tesla price target to $225, citing weak demand and profit-margin concerns. He forecasts a 26% drop in first-quarter deliveries compared to Q4 2024 and expects 2025 annual deliveries to fall below 1.7 million units—a 5% year-over-year decline. At the same time, Tesla’s ambitious robotaxi rollout remains speculative at best.
Musk’s recent suggestion that the U.S. should exit NATO only adds to the list of politically divisive statements that could further alienate potential customers and investors. With protests mounting and Tesla’s stock continuing to slide, the company faces a critical juncture: either deliver on its lofty technological promises or risk losing investor confidence in the long run.
As Tesla navigates these turbulent waters, one question looms large: Can Musk balance his political ambitions with Tesla’s financial health, or will his involvement in global affairs continue to weigh down the company’s fortunes?
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