Tesla’s stock took a sharp hit on Tuesday, plunging more than 8% and pushing the electric vehicle giant’s market cap below $1 trillion for the first time since early November. The latest drop continues a brutal start to 2025 for the company, with shares down 25% year-to-date, significantly underperforming the Nasdaq’s modest 1.5% decline. Since Tesla’s record close on December 16, its stock has tumbled over 35%.
The financial losses extend to CEO Elon Musk, who has seen his net worth shrink by over $100 billion during this period. Despite the losses, Musk remains the world’s richest person, with an estimated fortune of $380 billion.
The recent downturn was fueled by a Reuters report detailing Tesla’s underwhelming self-driving upgrade in China. Tesla’s “navigate on city streets” feature reportedly fell short of Musk’s ambitious promises, frustrating customers who had expected a more advanced system. Compounding the issue, Chinese rivals like BYD and Xiaomi offer similar or superior self-driving tech at no additional cost, intensifying competitive pressure on Tesla in one of its most crucial markets.
Beyond performance concerns, Musk’s increasing involvement in politics has unsettled some investors. His leadership role in President Donald Trump’s Department of Government Efficiency (DOGE) has raised ethical questions, particularly regarding his access to government data and influence over regulatory agencies.
Additionally, Tesla has faced backlash due to Musk’s controversial rhetoric, prompting protests at Tesla stores worldwide. The stock also took a hit following Trump’s announcement of sweeping tariffs on Canada, Mexico, and China, which threaten Tesla’s global supply chain and sales.
Tesla’s fourth-quarter earnings report added to investor concerns. The company missed analysts’ estimates, with automotive revenue declining 8% year-over-year and operating income plunging 23%. A key factor behind the drop was a decline in average selling prices for Tesla’s aging Model 3, Model Y, Model S, and Model X lineup.
Tesla’s struggles were particularly evident in California, its biggest U.S. market, where sales fell 11.6% in Q4 2024, according to the California New Car Dealers Association.
Tesla’s stock remains about 20% above pre-election levels, primarily due to a 15% rally immediately after Trump’s victory. Musk played a major role in Trump’s campaign, donating $290 million to Republican efforts in 2024, most of which supported Trump’s re-election. With competition rising, political controversy growing, and financial performance weakening, Tesla faces increasing challenges as it navigates 2025.
