Analysis of Tesla Stock Decline and Market Implications

Key Facts

Stock Performance: Tesla shares dropped over 6% to $223 by mid-morning Tuesday, extending a decline that has seen the stock fall for nine consecutive weeks. Year-to-date, Tesla is down 44%, the worst performer on the S&P.
Analyst Downgrades:
- RBC Capital Markets analyst Tom Narayan cut Tesla's price target by $120 to $320, citing intensifying competition in China, which accounts for 21% of Tesla’s 2024 sales. He expects Tesla’s market share in China to halve to 10%.
- Mizuho analysts led by Vijay Rakesh lowered their price target by $85 to $430 and slashed 2025 vehicle delivery forecasts from 2.3 million to 1.8 million, a 21% reduction below consensus estimates.

Global Sales Decline: Tesla’s U.S. sales fell 2% YoY, while China sales dropped 49% and Germany sales plummeted 76%, despite overall EV market growth in these regions.
Brand Perception: Weakening brand perception in the U.S. and EU, coupled with geopolitical tensions, has hurt Tesla's performance.

Chinese Competition: BYD introduced a fast-charging system capable of charging cars in less than a third of the time Tesla’s chargers take. Zeekr announced free self-driving systems in China, further intensifying competition.
Market Share Projection: RBC expects Tesla’s China market share to fall to 10%, down from its current level.

Tariffs and Trade Policy: Tesla submitted comments to the U.S. Trade Representative advocating for a phased approach on tariffs, highlighting challenges in sourcing components domestically.
Political Risks: Musk’s alignment with Trump’s policies has hurt Tesla’s image in regions like Germany, where 45% of respondents view him negatively.

Valuation Impact: Analysts have significantly reduced valuations for Tesla’s self-driving and robotaxi units, cutting them from $1.26 trillion to $850 billion.
Strategic Challenges: The intensifying competition and regulatory headwinds suggest long-term structural challenges for Tesla in key markets.

Elon Musk’s net worth stands at $321 billion, down from a peak of $464 billion in December 2022, reflecting investor concerns about Tesla’s future prospects.