The stock dropped more than 13% in afternoon trading, extending its slide to over 50% from a mid-December peak. The decline significantly outpaced the 2.5% drop in the S&P 500.
From Election Rally to Market RoutFollowing Donald J. Trump’s election victory, Tesla shares surged amid optimism that Musk’s role as a key Trump adviser would benefit the company. Investors hoped his influence in Washington would help clear regulatory roadblocks for Tesla’s autonomous driving technology.
Instead, Musk’s deepening political entanglements have sparked protests and alienated consumers. Tesla’s market capitalization has now shrunk by more than $700 billion since December.
Public Backlash and Falling SalesTesla has faced mounting public protests as Musk has aligned himself with the Trump administration’s budget-slashing policies, which have resulted in mass layoffs of park rangers, civil servants, and cuts to foreign aid.
The growing backlash has turned violent in some cases:
Musk’s endorsement of far-right parties in Europe, including in Germany, has also hurt Tesla’s international reputation. European sales plummeted in February, with Germany—Tesla’s largest market on the continent—seeing a 76% decline.
Rising Competition and Global UncertaintyBeyond politics, Tesla is also struggling with increased competition and a lack of new models. Volkswagen outsold Tesla in EVs outside of China for the first time in January, according to SNE Research.
Tesla could also face challenges from U.S.-China trade tensions. Despite benefiting from Trump’s tariffs on foreign automakers, Tesla’s reliance on its Shanghai Gigafactory for production and exports puts it at risk if relations with China deteriorate.
What’s Next for Tesla?With sales declining, protests mounting, and Musk’s political influence proving to be a liability, investors are growing concerned that he is too distracted by his Washington ambitions to steer Tesla back on course.
As Musk doubles down on his role as a political power player, the question remains: Can Tesla weather the storm, or is its golden era coming to an end?