Explainer: Why Tesla sales and shares are falling?

Explainer: Why Tesla sales and shares are falling?

  • 10.03.2025 18:00
  • msn.com
  • Keywords: Tesla, BYD

Tesla's sales and stock prices are declining due to intense competition from Chinese automakers like BYD, Elon Musk's controversial political affiliations alienating consumers, and profit margin erosion from price cuts. Despite short-term boosts in sales, Tesla faces growing challenges in global markets, with significant drops in the U.S., China, and Europe, and investor concerns over its long-term viability.

Tesla NewsTSLAsentiment_dissatisfiedBYDDYsentiment_satisfied
open_in_newOriginal article

Estimated market influence

Tesla

Tesla

Negativesentiment_dissatisfied
Analyst rating: Neutral

Facing declining sales and stock prices due to price reductions affecting profit margins, political affiliations alienating consumers, and competition from Chinese automakers like BYD.

BYD

BYD

Positivesentiment_satisfied
Analyst rating: Strong buy

Overtook Tesla as the world’s largest EV producer in 2024, contributing to Tesla's decline.

Context

Analysis: Why Tesla Sales and Shares Are Falling?

Key Facts and Data Points:

  • Tesla's 2024 Production: 1,774,442 electric vehicles (EVs), just 4,500 units short of BYD’s 1,777,965.
  • Sales Decline in Major Markets:
    • U.S.: New Tesla registrations fell by 11% YoY in January 2025.
    • China: Sales dropped by 51.47% MoM and 49.16% YoY in February 2025 (CPCA data).
    • Europe: Jato Dynamics reported a 45% decline, with Germany seeing a 76% drop in registrations after Musk endorsed the far-right AfD party.
  • Stock Performance:
    • Tesla shares reached a record high of USD 488 in December 2024 but fell by ~50%, hitting a low of USD 215 on March 10, 2025 (worst day since 2020).
    • JPMorgan cut its Q1 2025 delivery forecast by 20% to 355,000 units and lowered the price target to USD 120 from USD 135.
  • Investor Sentiment:
    • Morgan Stanley survey: 85% of respondents believe Musk’s political views negatively impact Tesla’s business.
  • Strategic Challenges:
    • Price cuts to compete with Chinese EVs eroded profit margins.
    • BYD and other Chinese automakers offer tech-rich, affordable EVs at prices significantly lower than Tesla.

Market Trends and Business Impact:

  • Global Competition Intensifies: Chinese EV manufacturers like BYD are gaining market share due to their focus on affordability, technology, and styling.
  • Political Backlash: Musk’s controversial affiliations (e.g., support for Trump, involvement with DOGE) have alienated consumers in key markets, leading to sales boycotts and protests.
  • Profit Margins Under Pressure: Tesla’s price-cutting strategy has prioritized volume over profitability, worrying investors.

Competitive Dynamics:

  • Chinese Dominance: BYD surpassed Tesla as the world’s largest EV producer in 2024. Chinese automakers are disrupting global markets with cheaper, feature-rich vehicles.
  • European Market Shifts: Tesla’s sales dropped significantly in Europe after Musk’s political statements, with Germany leading the decline.

Strategic Considerations:

  • Entry into India: Tesla plans to enter India but faces challenges with premium pricing (starting at Rs 30 lakh) in a price-sensitive market. Local manufacturing could be key for long-term success.
  • Investor Concerns: Declining sales, stock price volatility, and political risks have raised doubts about Tesla’s growth trajectory.

Long-Term Effects and Regulatory Impacts:

  • Potential Market Share Loss: If Tesla cannot recover from its current challenges, Chinese automakers may dominate the global EV market.
  • Regulatory Risks: Political backlash could lead to regulatory scrutiny or restrictions in certain markets, though no specific impacts are mentioned yet.

Conclusion:

Tesla’s struggles highlight the growing competition from Chinese EV manufacturers and the risks associated with executive political involvement. While Tesla’s entry into new markets like India offers potential growth, its short-term challenges suggest a need for strategic recalibration to maintain profitability and market share.