Tesla (TSLA) Stock: Musk’s Political Activities Drive 50% Stock Decline While Insiders Sell

Tesla (TSLA) Stock: Musk’s Political Activities Drive 50% Stock Decline While Insiders Sell

TLDR

• Tesla stock has dropped more than 50% from its December high, a decline that has happened only three times before in company history
• Elon Musk’s political activities and work with the Trump administration may be hurting the Tesla brand, with sales declining 49% in Europe during early 2025
• Several Tesla insiders have recently sold shares despite Musk urging employees to hold theirs
• Tesla plans to launch a robotaxi service in Austin, Texas in June, competing with Alphabet’s Waymo
• Some investors see the current price as a buying opportunity based on historical valuation metrics

Tesla’s stock has tumbled more than 50% from its December record high of $480 per share. This marks the fourth time in company history that shares have declined by at least 50% from a peak.

The stock hit its high in December after Donald Trump won the presidential election. Investors believed CEO Elon Musk’s relationship with President Trump would benefit the company.

That anticipated benefit has yet to materialize. Instead, shares have fallen dramatically, though they’ve rebounded slightly to about 45% below their peak.

Tesla’s demand problems are worsening globally. The company has lost market share across its three major markets in 2024, with losses accelerating in 2025.

In January alone, Tesla’s market share fell by nearly 7 percentage points in the U.S. It dropped 8 percentage points in Europe and 2 percentage points in China.

The sales decline has been particularly severe in Europe. Tesla sales fell 49% in the region during the first two months of 2025, despite growth in the broader electric car market.

Many analysts attribute this weakness to increased competition from other automakers. Tesla’s aging lineup of electric vehicles has struggled against newer competitors.

The company plans to build a more affordable vehicle this year, reportedly called the Model Q. This new model may help address some demand issues.

Elon’s Politics

However, many believe that weak demand is also tied to Elon Musk’s increasing involvement in politics. His outspoken views and work on the Department of Government Efficiency (DOGE) for the Trump administration have created controversy.

This political activity appears to be damaging the Tesla brand. It has reportedly alienated potential buyers and even led to vandalism at several Tesla dealerships and charging stations.

The situation prompted Musk to hold an all-hands meeting recently. He reassured employees and urged them not to sell their shares, highlighting the company’s innovations in AI, autonomous vehicles, and robotics.

However, his plea comes as several Tesla insiders have sold their stock. CFO Vaibhav Taneja, Director James Murdoch, and Musk’s brother Kimbal Musk have all sold shares worth millions in recent weeks.

These sales could reflect broader concerns about the business from management. They also seem to contradict Musk’s message to employees about holding their shares.

Robotaxi Plans

Despite these challenges, Tesla is pushing forward with its robotaxi plans. The company aims to launch an autonomous ride-sharing service in Austin, Texas this June.

This launch is critical as Tesla tries to catch up with Alphabet’s Waymo, which has been providing autonomous rides in several cities for years.

Tesla’s robotaxis use only computer vision, making them potentially less expensive and more scalable than Waymo’s vehicles. Waymo relies on lidar and radar in addition to cameras, requiring detailed mapping of streets before launching in new cities.

Analysts will get more clarity on Tesla’s situation when the company reports first-quarter deliveries on April 2. Estimates have been cut to 355,000 vehicles, representing a 15% drop in the first quarter.

This would fall well below Musk’s goal of 20-30% annual sales growth. Such a decline would likely confirm fears that the company is facing serious challenges.

Not all investors are pessimistic, however. Top investor Dhierin Bechai sees the current price as a potential buying opportunity based on historical valuation metrics.

Bechai notes that some of the sales decline may be due to consumers waiting for the new Model Y. He also points out that the EV slowdown appears to be industry-wide, not just affecting Tesla.

History provides some hope for Tesla shareholders. In the three previous instances when the stock fell more than 50%, shares not only recovered but returned an average of 446% in the year following the bottom of those declines.

The question remains whether this decline has reached its bottom. For Tesla to recover, the company likely needs to address its demand issues and successfully launch its robotaxi service.

Wall Street remains divided on Tesla’s prospects. With 14 Buy, 11 Hold, and 12 Sell ratings, the stock currently holds a consensus Hold rating, with a 12-month average price target implying a potential 24% upside.

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