Tesla Is Bleeding Out, and Fast
#TSLA has taken a sharp hit since reaching its all-time highs on December 16, 2024. The company’s shares are now the worst-performing among the Magnificent 7 and one of the biggest losers in the S&P 500 (#US500). Tesla has dropped by over $600 billion in two months, almost -50% of its December market cap, while Elon Musk’s net worth has taken a $140 billion hit. But what’s driving this sell-off?
One major factor is Musk’s growing political presence, particularly his association with the Department of Government Efficiency (D.O.G.E), which some investors fear could damage Tesla’s brand. At the same time, concerns are rising about Musk’s competing priorities, as his focus seems to be shifting toward SpaceX, xAI, and social media platform X – now worth more collectively than his Tesla stake.
Fundamentally speaking, the public has begun to notice strong problems in Tesla’s performance. Sales in Europe nearly halved in January, raising doubts about the company’s ability to meet Musk’s ambitious 30% y/y growth projections for 2025. Meanwhile, in China, the second biggest market for Electric vehicles (EVs) for the company outside the US, Tesla’s long-awaited Autopilot update received a lukewarm response. At the same time, Chinese EV company BYD (#BYDDY), one of Tesla’s key rivals, is offering self-driving features for free, intensifying a price war Tesla is unlikely to withstand.
China's EV market is now home to at least 27 prominent companies contributing to the industry's rapid expansion. Several factors contribute to the superior performance of Chinese EV companies in the domestic market, starting from government support and ending with more affordable (and better) car models.
Looking ahead, Tesla’s Q1 delivery numbers in April could be a key test, with analysts expecting a sharp decline. While long-term projects like the robotaxi launch in June and the Optimus humanoid robot remain potential catalysts, the near-term outlook remains bearish. Given the current market sentiment, you can consider short plays in the EV giant.
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