Tesla Inc. (TSLA) has experienced a significant downturn in 2025, with its stock price plummeting approximately 29.3% year-to-date, reducing its market capitalization to around $917 billion. This decline positions Tesla as the worst-performing large-cap stock this year. Several factors contribute to this downturn, including decreasing electric vehicle (EV) demand, intensified global competition, and CEO Elon Musk’s political controversies, notably his public feud with President Donald Trump.
Declining EV Demand and Intensified Competition
Tesla’s sales have been adversely affected by a global slowdown in EV demand. In key markets such as Europe and China, Tesla has faced stiff competition from local manufacturers. For instance, in Germany, Tesla’s sales dropped by 59% in January 2025 compared to the previous year, while in China, sales fell by approximately 50% in February 2025. Chinese automaker BYD surpassed Tesla in global EV sales in 2024, highlighting the increasing competition in the EV market.
Elon Musk’s Political Controversies
Elon Musk’s political engagements have also impacted Tesla’s performance. His public support for far-right political figures and parties, such as Germany’s Alternative for Germany (AfD), has led to consumer backlash and declining sales in Europe. In the United States, Musk’s political activities, including his role in the Department of Government Efficiency (DOGE) under President Trump, have been met with criticism. A Morgan Stanley survey indicated that 85% of investors believe Musk’s political involvement negatively affects Tesla’s business fundamentals.
Feud with President Trump
The relationship between Elon Musk and President Trump has deteriorated, culminating in a public feud. Musk criticized President Trump’s tax and spending bill, leading to Trump’s threat to cut off government contracts with Musk’s companies, including Tesla and SpaceX. This conflict has raised concerns about the future of federal support for Musk’s ventures, further unsettling investors.
Financial Performance and Investor Sentiment
Tesla’s financial performance has mirrored these challenges. The company’s fourth-quarter earnings in 2024 fell short of analysts’ expectations, with automotive revenue down 8% year-over-year and operating income decreasing by 23%. These financial setbacks, coupled with the aforementioned issues, have led to a significant decline in investor confidence, as evidenced by the substantial drop in Tesla’s stock price.
Conclusion
Tesla’s current challenges stem from a combination of declining EV demand, increased global competition, and the repercussions of Elon Musk’s political activities. The company’s future performance will likely depend on its ability to navigate these issues, restore investor confidence, and adapt to the evolving dynamics of the global EV market.
