Tesla Stock Plunge: Why Is It Falling?
3 min read
Elon Musk has never been more powerful, yet Tesla’s stock is taking a nosedive. With electric vehicle (EV) sales slowing and Musk’s deep dive into politics becoming a distraction, investors are growing wary. But what exactly is driving Tesla’s decline, and how is Musk’s increasing influence in Washington playing a role?
Musk’s Political Ties and Tesla’s Stock Woes
On Tuesday, the White House South Lawn looked more like a Tesla showroom than a political event. Musk proudly displayed Tesla’s latest innovations, while former President Donald Trump praised the billionaire’s leadership and vowed to crack down on vandalism against Tesla vehicles.
Musk’s involvement in Trump’s administration has reached new heights—he now leads the Department of Government Efficiency (DOGE), a role where he claims to have uncovered billions in government waste. Yet, despite Musk’s growing influence, Tesla’s shares have been spiraling downward.
This past Monday, Tesla stock (NASDAQ: TSLA) plummeted 15% to $215, marking its worst day since 2020. While a brief presidential endorsement helped it recover slightly to $235, the stock remains significantly down from its December 2024 highs of over $435.
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Why Are Tesla Stocks Falling?
Tesla’s stock was due for a correction, according to experts. Robert Scott, an international economics and trade specialist, says Tesla was “extremely overvalued.” The company had one of the highest price-to-earnings ratios ever recorded, meaning its stock price was inflated relative to its actual profits.
Additionally, Tesla’s inability to release new models has further dampened investor confidence. William Lee, chief economist at the Milken Institute, pointed out ongoing delays in the Tesla Model Y refresh and the lack of groundbreaking product launches.
EV Sales Slump and Growing Competition Hurting Tesla Stocks
Tesla isn’t just battling stock issues—it’s also struggling with sales. While global electric vehicle adoption continues to rise, Tesla’s numbers tell a different story.
- Germany: Tesla sales dropped a staggering 76% in February year-over-year, despite overall EV sales increasing by 31%.
- Scandinavia & France: Sales fell 40% in Norway, Denmark, and Sweden and 26% in France.
- China: Tesla’s second-largest market saw sales plunge nearly 50% in February.
- Australia: Sales dropped by 71%.
The main culprit? Increased competition from automakers like BYD, which saw a 90% surge in sales. Chinese government policies are also favoring domestic EV manufacturers, further pushing Tesla out of its second-largest market.
To counteract declining demand, Tesla has aggressively cut vehicle prices in both the U.S. and China. While this strategy has helped short-term sales, it has also eaten into profits, worrying investors about long-term sustainability.
Musk’s Distractions: Politics, DOGE, and Legal Troubles
One of the biggest concerns among Tesla shareholders is Musk’s increasing focus on politics and his new role in Trump’s administration. His involvement in the Department of Government Efficiency (DOGE) has raised red flags. Experts warn that DOGE’s aggressive budget cuts could push the U.S. economy closer to a recession, which would hit Tesla—already a highly leveraged stock—particularly hard.
Beyond politics, Musk’s legal and financial challenges are piling up:
- His $44 billion acquisition of Twitter (now X) has become a money pit, especially as advertisers pull back.
- His endorsement of far-right parties in Europe has led to protests and vandalism of Tesla cars and factories.
- He faces a $258 billion lawsuit over allegations of artificially inflating Dogecoin’s price using his influence on social media.
These distractions make investors uneasy. According to Lee, Musk is spreading himself too thin, which impacts Tesla’s ability to innovate and maintain its industry dominance.
Trump’s Trade Policies: A Double-Edged Sword for Tesla
While Musk and Trump appear to have a strong alliance, the former president’s trade policies could harm Tesla’s future. Trump has historically opposed EV subsidies and emissions regulations—two factors that have helped Tesla thrive. Additionally, his ongoing trade war with China threatens Tesla’s supply chain and export market.
Can Tesla Regain Its Momentum?
Tesla’s stock troubles aren’t just about politics. Without new models, breakthroughs in self-driving technology, or major robotics advancements, the company risks losing its edge.
Musk’s political engagements may be fueling his influence in Washington, but they are also eroding confidence in Tesla’s future. Investors are watching closely, wondering whether Musk will refocus on innovation—or if Tesla’s golden era is coming to an end.
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