Tesla Stock Decline Analysis 2025

 

Tesla Stock Decline Analysis 2025

Structural Causes of Market Volatility in March 2025: Global Sales Decline, Political Controversies, Tariff Wars, and Intensified Competition

Tesla Stock Trends and Market Value Changes

Tesla Stock Price Trend (January-March 2025)

$400

$350

$300

$250

$200

Early Jan $400

Mid Jan $410

Late Jan $418

Early Feb $400

Mid Feb $340

Late Feb $300

Early Mar $272

February Monthly Decline

-28%

Worst monthly performance since December 2022

Year-to-Date Decline

-33%

As of early March 2025

Market Capitalization

$915B

Dropped below $1 trillion

Market Cap Ranking

9th

Dropped out of "Magnificent 7"

Tesla's stock has shown a sharp decline since the beginning of 2025. As of early March 2025, the stock has fallen approximately 33% from its January peak, bringing the market capitalization down to $915 billion. February was particularly severe with a 28% drop, marking the worst monthly performance since December 2022. This decline has effectively erased almost all gains that came after the election of President Trump, which had initially sparked optimism for Tesla as a potential beneficiary of his administration.

Global Sales Decline

Tesla Sales Change by Market (Year-over-Year)

Germany -76%

France -63.4%

Sweden -44.3%

Norway -37.9%

UK -7.8%

China (Jan) -11.5%

China (Feb) -49.2%

European Market Status

• Tesla's new car registrations in the European market decreased by 45% year-over-year in January, contrasting with the overall electric vehicle market's growth of 37%
• In Germany, Tesla's January sales plummeted by 59.5% to just 1,277 units
• In the UK, Tesla sales fell by 7.8%, and for the first time, the Chinese EV maker BYD outsold Tesla

Chinese Market Status

• According to the China Passenger Car Association, Tesla's China factory output in February 2025 decreased by 49.16% year-over-year to 30,688 units
• January also saw an 11.5% decrease in Tesla's sales in the Chinese market
• Meanwhile, competitor BYD showed 90.4% growth during the same period

Tesla's global sales decline, particularly in Europe and China, is directly impacting its financial performance. In its Q4 2024 earnings report, Tesla announced that automotive revenue decreased by 8% year-over-year, while operating profit fell by 23%. This decline is attributed to lower average selling prices for Tesla's key models including Model 3, Model Y, Model S, and Model X.

Elon Musk's Political Activities and Brand Image Damage

January 2025

Musk appointed as head of the Department of Government Efficiency (DOGE) in the Trump administration, wielding significant influence

Late January 2025

Musk made statements supporting Germany's far-right Alternative for Germany (AfD) party, triggering strong backlash in the German market

Early February 2025

At Trump's inauguration, Musk made a hand gesture reminiscent of a Nazi salute, further intensifying controversy in European markets

Mid-February 2025

The term 'Musk Risk' emerged among investors, adding further downward pressure on Tesla's stock

Musk's political activities are alienating Tesla's core customer base of environmentally conscious consumers with left-leaning tendencies. This can be described as a 'buyers' strike'.

- Adam Jonas, Morgan Stanley Analyst

Consumer Perception Changes

• A recent survey across five European countries revealed that most Europeans perceive Musk as an unfavorable figure
• Tesla recorded a 37% unfavorability rating, the highest among major electric vehicle brands including Toyota, Volkswagen, and Ford
• According to an Electrek.com survey, 60% of electric vehicle buyers reported that Musk's political actions discourage them from purchasing Tesla products

Bloomberg News identified the sales plunge in Germany as "a result of Musk's more active political involvement in Germany than ever before." Musk's political activities are increasingly seen as alienating Tesla's key customer base of environmentally conscious consumers, creating a structural problem that may not be easily resolved in the short term.

Tariff War and Supply Chain Threats

Tesla Vehicle Dependency on Mexican Parts

Vehicle Model	Mexican Parts Dependency	Expected Cost Impact
Model 3 LR AWD/RWD	20%	Medium
Model 3 Performance	20%	Medium
Model Y LR AWD/RWD	25%	High
Model Y Performance	20%	Medium
Cybertruck	25%	High
Model S	20%	Medium
Model X	25%	High

Late February 2025

President Trump announced a 25% tariff on imports from Canada and Mexico

Early March 2025

Tariff policy went into effect, directly impacting Tesla's supply chain

Early March 2025

Canada responded with retaliatory 25% tariffs on $155 billion worth of U.S. imports

We have been pushing for localization of our supply chain in all markets, but we still rely heavily on global parts. Therefore, the imposition of tariffs will impact our business and profitability.

- Vaibhav Taneja, Tesla CFO

Bank of America analysts have pointed out that the Trump administration's tariffs on Canada and Mexico pose "substantial risks" to North American automakers, including Tesla. As a result, Bank of America lowered its Tesla price target from $490 to $380. This tariff situation represents a significant challenge for Tesla's cost structure and profit margins.

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