Elon Musk's former connection with President Donald Trump once seemed to promise a favorable business climate for Tesla. However, despite this perceived advantage, Tesla is facing challenges. Long-standing models like the Model S have seen only minor updates, and the much-anticipated Cybertruck is falling short of expectations, struggling with quality issues and depreciation concerns. Additionally, used Tesla prices are dropping faster than the average, and trade-ins are increasing.
The Model 3 received a significant update but is slipping in the sales rankings, while the Model Y remains a strong seller and is set for an update in 2026.
Tesla aims to launch a more affordable Model Y in Shanghai to address a 49% sales drop in February. Yet, it faces stiff competition from cheaper and more technologically advanced rivals. Notably, Tesla's Full Self-Driving software hasn't received approval in China, where competitors offer Level 3 autonomy. Moreover, Tesla's battery charging capabilities lag behind rivals like BYD's rapid charging system. These hurdles could potentially halve Tesla's sales in China this year, while global sales are already on the decline.
Musk's focus is split between Tesla and other ventures like SpaceX and X, which impacts Tesla's concentration. His involvement in politics, particularly as a controversial ally of Trump, has sparked backlash. Once-admired, Musk's image has become contentious, turning some Tesla fans away. Incidents of vandalism against Tesla properties and concerns of political retribution further complicate these challenges.
Musk inflamed tensions with a gesture perceived as a Nazi salute, significantly impacting sales in Germany, where a Tesla factory is located. Tesla's stock plummeted, experiencing one of its steepest declines in recent history. Urging people not to sell Tesla stock seems desperate as the market value continues to nosedive, largely resting on Musk’s previous charisma and the company's optimistic future.
Tesla's valuation decline coincides with anticipated regulatory changes under Trump's leadership, including the potential removal of EV tax credits, which significantly contribute to Tesla's revenue. Political maneuvers, such as promoting Tesla at a White House event, haven't boosted sales as intended.
Tesla stands at a crossroads, grappling with declining sales, intense competition, and political missteps. Musk's engagement outside of Tesla and his controversial political ties have tarnished both his and the company’s image. Rather than indulging in political theatrics, a renewed focus on developing new products and improving Tesla’s public perception might offer a more sustainable path forward.
