World
India
Tesla’s stock has seen a dramatic decline, plunging 45% in just three months, raising concerns among investors about the company’s valuation and future growth prospects. Despite this significant drop, debates continue over whether Elon Musk’s electric vehicle (EV) giant remains an overvalued entity or a strong long-term investment, according to a report by Reuters.
Why Are Tesla Shares Falling?
Tesla’s market capitalization has fallen sharply from its peak of $1.5 trillion on December 17, 2024. The surge in stock value at the time was largely attributed to Musk’s financial support for Donald Trump’s election victory. However, in the months that followed, Tesla faced declining sales and profits, coupled with increasing concerns over Musk’s political engagements, which have unsettled investors.
Several key factors have contributed to Tesla’s stock slump:
- Declining vehicle sales and profitability
- Musk’s political associations, particularly his advisory role to Trump
- Market concerns about Musk’s focus shifting away from Tesla’s core business
Despite the sharp decline, Tesla still holds a market value of approximately $845 billion, which remains significantly higher than the combined valuation of several traditional automakers.
Growing Competition in the EV Market
Tesla’s dominance in the EV sector is facing unprecedented challenges. The Cybertruck, Tesla’s only new model since the launch of the Model Y in 2020, has struggled to meet expectations. Musk had projected sales of 250,000 units, but the vehicle managed to sell only 38,965 units last year, according to the report.
Adding to Tesla’s woes, the company is now encountering policy challenges from Trump, the very leader Musk supported. Trump has proposed ending EV subsidies, which have been instrumental in boosting Tesla’s revenue over the years. However, Musk argues that such a policy change would impact Tesla’s competitors more severely than Tesla itself.
Meanwhile, Chinese automaker BYD is surging ahead, leveraging its successful hybrid vehicle business to push total sales to 4.2 million units in 2024—more than double Tesla’s figures. Yet, despite its strong performance, BYD’s market capitalization remains less than one-sixth of Tesla’s.
What’s Next for Tesla?
With increasing competition, evolving policies, and investor concerns over leadership distractions, Tesla’s future remains uncertain. The key question remains: Will Tesla’s advancements in artificial intelligence and self-driving technology redefine the automobile industry as Musk envisions, or is the company’s valuation more hype than reality? Only time will tell.
ALSO READ: Why Vodafone Shares Are Falling? Details
