Tesla’s stock (TSLA.O) experienced a sharp decline on Tuesday, dropping by 8%, which led to its market valuation falling below the $1 trillion mark for the first time since November. The downturn came after new data revealed a significant drop in Tesla’s sales in Europe for the month of January.
According to the European Automobile Manufacturers Association, Tesla’s sales in the region fell by 45% compared to the same period last year. This decline stands in stark contrast to the overall growth of the electric vehicle (EV) market in Europe, which saw a 37% increase in sales. The steep drop in Tesla’s European sales has raised concerns about its market position amid growing competition from other automakers expanding their EV offerings.
The sharp decline in Tesla’s European sales highlights the broader challenges the company faces, especially after experiencing a drop in global deliveries last year. This downturn has intensified pressure on CEO Elon Musk to accelerate the launch of more affordable Tesla models, which could help the company remain competitive in an increasingly crowded electric vehicle market. Additionally, the slowdown has put a spotlight on Tesla’s long-term vision, particularly its push toward autonomous driving technology—a key area Musk has repeatedly emphasized as central to the company’s future growth and innovation.
Tesla’s stock fell to $305, bringing the company’s market capitalization down to $981 billion. Despite this decline, Tesla’s valuation remains more than double the combined worth of several major global automakers, including General Motors, Ford, Volkswagen, Toyota, Hyundai, and BMW.
Beyond financial concerns, some investors have expressed unease about CEO Elon Musk’s expanding commitments outside of Tesla. In particular, his reported involvement in leading efforts to radically downsize the U.S. federal government at the request of President Donald Trump has sparked speculation that his focus may be shifting away from Tesla. Additionally, there are concerns that his political associations could impact Tesla’s brand perception among certain consumers. Musk is already balancing multiple high-profile ventures, including his leadership of privately held aerospace company SpaceX, as well as other business ventures, raising questions about how he manages his time across these demanding roles.
Tesla’s latest Autopilot update in China has fallen short of expectations, leaving many users disappointed as it failed to fully deliver on the company’s earlier promises. The underwhelming update comes at a time when Tesla is facing increasing scrutiny over its autonomous driving technology, particularly in a competitive market like China, where local automakers are rapidly advancing their own self-driving capabilities.
Meanwhile, concerns about CEO Elon Musk’s ability to effectively manage his various business ventures continue to grow. Art Hogan, chief market strategist at B. Riley Wealth in Boston, questioned whether Musk’s reported involvement in White House discussions—where he is said to be playing a key role in efforts to significantly reduce the size of the federal government—could be taking away from his responsibilities at Tesla. “He’s a very hands-on operator, and if you’re spending that much time in an office in the White House, how much time are you spending running all of your other companies, including the one that’s publicly traded?” Hogan remarked, highlighting investor concerns about Musk’s bandwidth as he oversees multiple high-profile businesses.
Investor concerns are mounting over the possibility of excessive spending on artificial intelligence, a worry that is not limited to Tesla but also affects other tech giants like Microsoft and Meta Platforms. These concerns have become particularly pronounced as market participants await the quarterly report from AI chip leader Nvidia later on Wednesday.
Adding to the apprehension, Tesla’s stock is currently trading at a valuation of 112 times its expected earnings, which is notably higher than its five-year average price-to-earnings ratio of 93, as reported by LSEG. In stark contrast, traditional automakers such as Ford and General Motors are trading at much lower multiples—around eight times and seven times earnings, respectively. This disparity has fueled debates about whether Tesla’s lofty valuation might be partly attributed to its aggressive investment in AI technologies.
Supporters of Tesla remain optimistic about the company’s future, highlighting its plans to introduce a more affordable electric vehicle as a key factor that could drive long-term growth. Additionally, they point to CEO Elon Musk’s ambitious vision of launching a paid autonomous ride-hailing service, which he has positioned as a major step toward the company’s self-driving future.
Despite the sharp decline in Tesla’s stock on Tuesday, the company’s shares have still gained 51% over the past 12 months, reflecting strong investor interest over the longer term. However, on a year-to-date basis, Tesla’s stock has faced significant challenges, currently down 24% since the start of the year.