Tesla’s stock is once again in freefall, with Wall Street slashing the electric carmaker’s share value by 15.4% in a single day. Has the market finally lost confidence in outspoken CEO Elon Musk? Or are there deeper issues at play in an increasingly cutthroat EV market?
Tesla is no stranger to market fluctuations, but this marks its biggest single-day fall since October – erasing nearly $100 billion from its market capitalisation in a single trading session, not to mention a significant chunk of the net worth of the world’s richest man.
Musk’s recent endorsements of controversial right-wing political figures and causes have drawn widespread backlash, particularly among the left-leaning and environmentally conscious buyers seen as Tesla’s core customer base. On his social media platform, X, Musk has supported far-right EDL leader Tommy Robinson, called the British Prime Minister a tyrant, and given exposure to an anti-Muslim political party in Germany. He also labelled Canada, a key market, as “not a real country”. Then there is the controversy surrounding a gesture Musk made at a Trump rally, which many interpreted as a Nazi salute.
Once seen as an unconventional strength, Musk’s public persona has become a liability.
Tesla sales are slumping in California, the company’s biggest U.S. market. In Europe, the outlook is even worse. Despite overall EV sales increasing in January, Tesla’s sales fell by 45%. Further afield, Tesla’s China sales – in the world’s largest EV market – appear to have halved over the past twelve months, though this is largely due to the Chinese government steering buyers toward domestic brands rather than Musk’s controversies.
These compounding factors have led Tesla to record its first annual global sales decline in twelve years.
At the same time, Musk’s new role at the head of President Trump’s Department of Government Efficiency (DOGE) has attracted widespread criticism. His combative approach – whether toward regulators, unions or federal employees – has raised questions about Tesla’s long-term governance. Musk has been at the centre of divisive DOGE policies, including the dismissal of climate scientists, labelling USAID as “domestic terrorists”, and freezing humanitarian aid for struggling nations.
Such actions have sparked a public backlash, leading to protests at Tesla dealerships and factories. Some owners have even reported vandalism – particularly those with the divisive Cybertruck. Many are now questioning their brand loyalty, with some placing stickers on their cars reading, “I bought this before Elon went nuts.”
But there is more to Tesla’s sudden stock decline than controversy surrounding its CEO. The company’s once-dominant position is under threat – legacy manufacturers are closing the technology gap, while state-backed Chinese competitors are aggressively driving down prices. In response, Tesla has cut wholesale margins on an ageing model line-up, shaking investor confidence in what was once one of the most profitable carmakers by unit.
Yet Tesla is not the only automaker under pressure from China’s EV onslaught. European bureaucracy is disrupting the industry, while Trump’s policy plans could reshape market dynamics. The president has vowed to roll back emissions regulations for combustion vehicles and eliminate the $7,500 EV tax rebate to incentivise electric car purchases.
Tesla, however, still holds a few aces up its sleeve. Later this year, the new Model Q compact SUV will be introduced, alongside refreshes for the Model Y and Model S. And in late 2025, the fully autonomous Cybercab is expected to enter production.
Autonomous technology is widely regarded as Tesla’s trump card, with the company leading the field and expanding into humanoid robotics. Trump’s Transport Secretary, Sean Duffy, has been tasked with cutting excessive regulation on carmakers and establishing a unified federal framework for self-driving technology – replacing the current web of state-by-state mandates. Musk has long argued that red tape is holding back the development of fully autonomous vehicles.
With this advantage, it’s easy to see why Musk has aligned himself with Trump, investing $270 million into the president’s re-election campaign. Still, after an initial “Trump bump”, Tesla’s market valuation has fallen 40% since December. That said, despite the latest setback, Tesla has still quadrupled in value since 2022.
Musk is also facing turbulence elsewhere. On the same day Tesla’s stock tumbled, X suffered a major cyberattack, while SpaceX is reeling from two high-profile rocket failures in as many months.
Tesla’s stock price has historically been resilient to Musk’s rhetoric. But as the line between CEO and company blurs, he may find himself increasingly at the mercy of his shareholders.
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