Why Tesla Stock Has Plummeted

A Deep Dive into the Decline

February 12, 2025

Tesla's stock has been in a steep decline, falling nearly 32% from its mid-December high of around $480 to approximately $328.50 as of February 12, 2025. This significant drop has left investors questioning whether this is a temporary correction or a sign of deeper issues within the company.

Several factors are contributing to Tesla's struggles, ranging from political controversies and weak financial performance to concerns over Elon Musk’s leadership distractions. In this analysis, I’ll break down the key reasons behind Tesla’s decline and what it could mean for the company’s future.

1. Political Controversies and Consumer Backlash

One of the biggest factors impacting Tesla’s recent decline is the negative consumer sentiment driven by political controversies surrounding Elon Musk. His public endorsements of controversial political figures have led to widespread backlash, particularly in Europe.

A recent report from The New York Post revealed that Tesla’s sales plummeted 59% in Germany and 63% in France in January. These are two of Tesla’s key markets in Europe, and such a drastic decline indicates that Musk’s political views are turning away potential buyers.

The controversy stems from Musk’s support for far-right European political parties, particularly Germany’s Alternative for Germany (AfD). This endorsement alienated a significant portion of Tesla’s European customer base, many of whom hold progressive views on climate change and green energy.

The takeaway: While Tesla is still the dominant EV player, it relies heavily on brand loyalty and its eco-conscious reputation. Musk’s growing political presence could be damaging the brand’s credibility, affecting long-term demand.

2. Weak Financial Performance and Profit Decline

Tesla’s fourth-quarter earnings report was another catalyst for the stock’s sharp decline. The company missed analyst revenue expectations and posted some worrying financial figures:

  • Total revenue grew by only 2% year-over-year, a massive slowdown for a company once known for explosive growth.

  • Revenue from vehicle sales dropped by 8%, largely due to price cuts across various Tesla models.

  • Profits fell by 53% in 2024, showing that Tesla is making less money even as it sells more cars.

Tesla has aggressively cut prices in an effort to boost demand, but this strategy has come at the expense of profitability. Lower prices mean thinner margins, and Tesla is struggling to keep up with rising production costs.

Tesla’s Pricing Problem

Tesla has been slashing prices to stay competitive, but this is not sustainable in the long run. The company has reduced the price of several of its most popular models, including the Model 3 and Model Y, to compete with a growing number of affordable EVs from competitors like BYD, Hyundai, and Volkswagen.

However, Tesla’s price cuts have failed to generate enough additional demand to offset the declining profit margins. Investors are worried about Tesla’s long-term profitability, especially as competitors improve their own EV offerings.

The takeaway: Tesla’s business model needs to shift beyond price cuts if it wants to remain profitable in a competitive EV market. Scaling AI, self-driving technology, and energy solutions could be Tesla’s next growth drivers.

3. Elon Musk’s Leadership Distractions and OpenAI Deal

Another major investor concern is that Elon Musk may be spreading himself too thin. Tesla has always been closely tied to Musk’s leadership, and any perceived distraction raises red flags among shareholders.

Recently, Musk has been exploring a massive $40 billion investment in OpenAI, which would make SoftBank the largest investor in the AI company. This move raises questions about Musk’s focus—will he prioritize Tesla, or will AI become his next big project?

This concern isn’t unfounded. Musk has been increasingly involved in multiple ventures, including:

  • X (formerly Twitter)

  • SpaceX

  • Neuralink

  • The Boring Company

  • xAI (his personal AI company)

With so many projects demanding his attention, investors are worried that Tesla could take a backseat.

Additionally, Tesla faces increasing competition in AI and self-driving technology, areas Musk has promised would be Tesla’s future. Companies like Waymo (Google), Cruise (GM), and Chinese rivals such as Baidu’s Apollo are all making significant advances in self-driving.

If Tesla fails to maintain its edge in AI and autonomous driving, it could lose its competitive advantage.

The takeaway: Investors need reassurance that Musk remains fully committed to Tesla. His OpenAI deal and distractions raise concerns about whether he can effectively manage Tesla’s future.

4. Broader Market Concerns and the EV Slowdown

Beyond Tesla’s internal challenges, the broader EV market is slowing down. The EV industry experienced massive growth over the last five years, but demand is starting to plateau in certain regions.

Key concerns include:

  • Higher interest rates, making EV financing more expensive.

  • Weaker demand in key markets like Europe and China.

  • Charging infrastructure challenges, limiting EV adoption in some areas.

  • New competition from traditional automakers, such as Ford, GM, and Volkswagen, which are rapidly expanding their EV lineups.

Tesla relies heavily on continued EV growth, but if the overall market slows down, Tesla’s growth will slow too.

What’s Next for Tesla?

Tesla’s recent dip is concerning, but it’s not necessarily the end of the road. The company still dominates the EV market and has a strong balance sheet that allows it to weather downturns.

However, Tesla needs to address key issues if it wants to rebound:

  1. Repair its public image – Musk’s political comments are alienating consumers, particularly in Europe.

  2. Improve profitability – Tesla needs to find a balance between price cuts and profit margins.

  3. Focus on innovation – The company must double down on AI and self-driving technology to stay ahead of competitors.

  4. Ensure Musk’s leadership remains strong – Investors need to be confident that Musk is fully committed to Tesla’s future.

If Tesla can correct these issues, the stock could rebound in the coming months. But if problems persist, it may face more declines as investors look for more stable and profitable alternatives in the EV and AI markets.