The “bromance” between U.S. President Donald Trump and tech billionaire Elon Musk was on full display on Tuesday when the White House South Lawn was transformed into a miniature Tesla showroom.
Musk lined up Tesla cars to showcase the electric car producer’s latest innovations, while Trump promised to brand anyone vandalizing a Tesla car as a “domestic terrorist.” This followed reports of a spate of vandalism and arson attacks on Tesla vehicles across the country.
Trump, known for his strong stance on domestic manufacturing and business leadership, has given Musk a prominent role in his new administration as the head of the newly created Department of Government Efficiency (DOGE). The department claims to have uncovered “billions and billions of dollars in waste, fraud, and abuse” in the U.S. federal government. However, Musk and Trump have yet to provide significant evidence to back up these claims.
Meanwhile, Tesla shares, listed on NASDAQ, are struggling. On Monday this week, they plummeted by 15 percent to close at $215—the stock’s worst day since 2020 and its lowest level since Trump won the presidential election in November. The shares rebounded slightly after Tuesday’s presidential endorsement of Tesla cars, rising to $231.83 in the morning before stabilizing at around $235 by the end of the day. On Friday, the shares were set to open at approximately $240.
Tesla’s stock has been in freefall since it peaked at over $435 in mid-December 2024. So why is the car manufacturer performing so poorly while its owner appears to be thriving in Washington?
Why is Tesla’s Share Price Falling?
Despite a strong performance following the November presidential election, Tesla’s stock was volatile throughout 2024 and has declined sharply since the start of this year. Robert Scott, a specialist in international economics and trade policy at the U.S.-based Economic Policy Institute, attributed the drop in share price to its “extreme overvaluation.”
“Tesla’s stock was highly overvalued, with one of the highest price-to-earnings ratios ever recorded,” Scott told Al Jazeera. This means the stock price was very high relative to the company’s actual profits. “This indicates that the stock price was inflated compared to market fundamentals.”
William Lee, chief economist at the Milken Institute, added that the decline is partly due to delays in launching new Tesla products.
“The refresh for the Tesla Model Y continues to be delayed, and more importantly, no new models have been introduced,” Lee said.
What Has Happened to Tesla Vehicle Sales?
There has been a significant drop in sales in Europe and other markets. According to Business Insider, Tesla’s February sales in Germany were 76 percent lower than the previous year, despite a 31 percent increase in overall electric vehicle sales. German sales also dipped in January after Musk endorsed the far-right AfD party. Sales fell by 40 percent year-on-year in Norway, Denmark, and Sweden, and by 26 percent in France. The company has also faced organized boycott campaigns in the UK and Portugal.
In China, Tesla’s second-largest market, sales plummeted by nearly 50 percent year-on-year in February, while in Australia, they fell by a staggering 71 percent.
The main reasons for these declines are increased competition from traditional automakers and emerging electric vehicle companies, particularly in China, where BYD reported a 90 percent rise in sales in February. Additionally, government policies in China increasingly favor domestic manufacturers.
Tesla has repeatedly cut vehicle prices to maintain demand in markets like the U.S. and China. While this strategy has boosted short-term sales, it has also reduced overall earnings, raising concerns among investors about long-term profitability.
According to Lee, Tesla’s failure to deliver innovations in self-driving technology and other key areas, such as robotics, is another major concern for investors.
“Investors are looking for progress on self-driving, which keeps getting postponed, and other disappointments in robotics weigh on investor sentiment,” he said.
Without new models or major technological advancements, Tesla is struggling to maintain its reputation as an industry leader, further contributing to its stock decline.
How Will Musk Be Personally Affected by All This?
Elon Musk also owns several other companies, including X, the social media platform formerly known as Twitter, which he acquired for $44 billion in 2022. However, his personal wealth is closely tied to Tesla’s stock price.
The Twitter acquisition has become a financial burden, especially as advertisers withdraw following Musk’s endorsement of European far-right parties and his pro-Trump posts on X. Musk was a major financial supporter of Trump’s presidential campaign last year, contributing over $250 million and making personal appearances on Trump’s behalf.
Musk’s political activities have sparked anger in the U.S., leading to protests and arson attacks at Tesla dealerships, factories, and charging stations. Similar attacks have occurred in Europe, including Germany, where Tesla vehicles have had their tires slashed.
Experts warn that Musk’s role at DOGE could make him a target for further criticism. Scott noted that DOGE’s efforts to scale back the federal budget and cut thousands of jobs could “push the economy closer to a recession.” Scott added, “A recession will hit highly leveraged stocks like Tesla particularly hard.”
Lee echoed these concerns, stating that Musk’s involvement in government is seen as a distraction from his ability to drive his companies toward delivering promised innovations on time.
How Will Trump’s Trade Policies Affect Tesla?
While President Trump does not directly influence Tesla’s current struggles, his policies, economic decisions, and perceived influence over Musk could have significant implications for the company, experts say.
For instance, Trump has historically opposed subsidies for electric vehicle producers and emissions regulations, which ultimately benefit companies like Tesla. He has also imposed tariffs on China, a country Tesla heavily relies on for exports. The ongoing trade war with China could disrupt Tesla’s supply chain and reduce its competitiveness in a crucial market.
“Trump’s tariffs are causing other countries to impose countervailing tariffs on U.S. exports. This will hurt Tesla sales abroad,” Scott said. He added that Trump’s efforts to reverse clean energy policies from the Biden administration could further weaken demand for electric vehicles, including Teslas.
What Else Is Holding Tesla Back?
Beyond financial challenges, Musk’s expanding portfolio of businesses has raised concerns among investors about his ability to effectively lead Tesla.
Scott also highlighted Musk’s involvement in Dogecoin, a cryptocurrency project he had no prior experience with before tweeting about it in 2020, which caused a 20 percent surge in its value. In April 2021, another tweet led to a 100 percent jump, and by December that year, Musk announced that Tesla would accept Dogecoin as payment for merchandise. Since then, Musk has faced a $258 billion lawsuit alleging he artificially inflated Dogecoin’s value through his social media influence.
“Musk’s increased demands on his attention, as he attempts to run both DOGE and his other businesses, means some of them may suffer from a lack of his focus,” Scott said.
Musk’s increasingly right-wing political stance may also have affected Tesla’s brand perception. Many Tesla owners tend to be environmentally conscious consumers who support sustainable energy initiatives and are not natural Trump supporters, experts say.
According to Lee, Musk appears to be intentionally prioritizing his involvement in U.S. government affairs over Tesla’s performance.
“While he is trying to be patriotic and do good for the country, his investors and companies are being sacrificed for the good of the United States’ future,” Lee said.
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