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With a YTD loss of nearly 39%, Tesla (TSLA) is the worst-performing constituent of the S&P 500 Index ($SPX). The stock fell almost 30% in February to wrap up its second worst month on record. The only time it fared worse was in December 2022, when concerns over CEO Elon Musk getting distracted from the company following his acquisition of Twitter (since renamed X) worsened the selloff.
Meanwhile, Tesla is now down 50% from its record highs and has also fallen out from the $1 trillion market cap club that it rejoined following President Donald Trump’s reelection.
The “Trump trade” has unwound in 2025, and Tesla has been feeling the heat. In this article, we’ll examine whether the worst is over for Tesla stock as both Musk and Trump have jumped in to revive sentiment. But before that, let’s look at what led to the massive crash in Tesla shares.
What Led to the Tesla Selloff?
In a previous article, I noted that Musk’s polarizing politics, concerns over him spending adequate time at Tesla, and falling sales in Europe were among the reasons dragging down Tesla. Even Musk recently admitted to “great difficulties” in managing multiple companies while fulfilling his obligations towards Trump’s Department of Government Efficiency (DOGE). Tesla shareholders perhaps deserve more time commitment from its billionaire CEO who has appealed to restore his mammoth $56 billion pay package, which happens to be the biggest in U.S. corporate history.
As for the slowdown in sales, the problem can no longer be brushed aside as a response to Model Y refresh and seasonal factors. The company is battling a slowdown in not only the U.S., but also Europe and China. The Tesla brand has faced backlash over Musk’s politics, and many would-be buyers seem to have shelved plans to buy a Tesla.
Has TSLA Stock Bottomed?
Meanwhile, after the massive crash, Tesla finally closed in the green on March 11. A recovery in beaten-down tech names coupled with a bullish note from Morgan Stanley analyst Adam Jonas – a perma TSLA bull – helped aid the recovery in TSLA.
Trump also came out to support Tesla, terming calls to boycott the company as “illegal.” The president bought a Tesla Model S at the White House with Musk by his side. Musk said that Tesla will doble its U.S. production over the next two years.
Currently, Tesla has an installed capacity of over 1 million units in the U.S. and, far from being capacity-constrained as it once was, the company now has excess capacity. Its U.S. sales fell last year, although Musk said he is optimistic about growing deliveries in 2025.
Tesla Might Not be Out of the Woods Yet
The electric vehicle (EV) market remains in turmoil amid the oversupply situation, which is putting pressure on prices. Musk sees autonomous driving as the key driver of Tesla’s current valuation, and the company plans to start offering robotaxi services in Austin this summer. There, however, remains a question mark over Tesla’s ability to charge premium pricing for autonomous driving, especially as China’s BYD (BYDDY) is offering self-driving features for free with its cars.
There is already an EV price war, and the last thing Tesla needs is an autonomous driving price war as the U.S. and China fight for global artificial intelligence (AI) dominance.
Even hardcore Tesla bulls are not too sold on Tesla’s near-term outlook and instead harp on long-term projects like Optimus to pitch TSLA as an AI play. I am on the same page and see Tesla as a formidable AI play, but there are still too many uncertainties and headwinds in the short term that Musk needs to address.
While there might be a short-term relief rally in Tesla after the massive drawdown, the company is not out of the woods yet.
On the date of publication, Mohit Oberoi had a position in: TSLA . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
