Tesla (TSLA) shares tumbled 10.4% on Friday, finishing a turbulent week at $239.43 as trade tensions between the US and China reached new heights. This decline adds to an already challenging year for the electric vehicle maker, with its stock now down 40% year-to-date. The company is grappling with a perfect storm of escalating trade conflicts, political controversies surrounding CEO Elon Musk, disappointing sales figures, and increasing competition.
Trade War Pressures Mount
President Donald Trump’s announcement of 34% “reciprocal” tariffs on Chinese imports—higher than many analysts had expected—triggered immediate retaliation from China, with matching 34% tariffs on U.S. goods. This tit-for-tat escalation has significant implications for Tesla, which derives about 22% of its total revenue from China and operates its most productive manufacturing plant there.
While Tesla sources most parts locally in China, potentially limiting direct cost increases, the trade conflict creates uncertainty around consumer sentiment and Tesla’s brand perception in this crucial market.
Musk’s Political Activities Impact Sales
Tesla’s troubles extend beyond trade tensions. The company reported a 13% drop in first-quarter deliveries—its worst sales decline in history—with just 336,681 cars delivered between January and March. This represents 50,000 fewer vehicles compared to the same period last year.
Tesla partially attributed its weak first-quarter performance to production pauses across all four factories for Model Y updates. However, much of this decline appears connected to backlash against Elon Musk’s high-profile role in the Trump administration as head of the Department of Government Efficiency (DOGE) and his support for far-right politics in Europe. Protests have targeted Tesla showrooms, with some charging stations and vehicles vandalized.
The political effects are particularly evident in Tesla’s traditional strongholds. European sales plummeted 49% in the first two months of the quarter, with German sales down a stunning 62%. In the U.S., customer loyalty has taken a geographic turn, as repeat purchases from Tesla owners have fallen to 65% in “blue states” while remaining stable at around 48% in “red states.”
Reports that Musk may step back from his formal government role while remaining an informal adviser caused a brief rebound in the stock price, highlighting investors’ concerns about the political dimension of Tesla’s challenges.
Competition Intensifies Globally
While Tesla is navigating political headwinds, competition in the electric vehicle market continues to intensify. Chinese automaker BYD (BYDDY) reported sales of over 416,000 pure electric vehicles in the first quarter, a 39% increase that firmly establishes it as the world’s largest EV seller for the quarter.
BYD’s advantages include lower prices and innovative technology, such as a new charging system promising 250 miles of range after just five minutes of charging. Unlike Tesla’s limited five-model lineup, with two models accounting for 95% of sales, BYD offers a broader range of vehicles at various price points.
In the U.S. market, Tesla has seen its dominant position erode from over 75% market share in 2022 to under 50% today, according to Kelley Blue Book estimates.
Analyst Outlook
Analysts remain skeptical about the company’s near-term prospects.
JPMorgan’s Ryan Brinkman has reduced the estimates for Tesla shares and reiterated an Underweight rating, setting a price target of $120 per share, noting Tesla’s reported first-quarter deliveries fell significantly below expectations, and highlighting what JPMorgan refers to as “unprecedented brand damage.” He has adjusted the earnings per share forecast for Q1 to $0.36, down from the previous estimate of $0.40.
Similarly, Truist Financials’ William Stein maintained a Hold rating on Tesla while lowering the price target to $280 (from $373), citing a shortfall in Tesla’s deliveries of 337,000 units against a consensus estimate of 407,900, which suggests weaker demand rather than production issues. Moreover, while average selling prices are stable, there is concern over potential pressure to reduce them to stimulate demand.
Tesla is rated a Hold overall, based on the recent recommendations of 39 analysts. The average price target for TSLA stock is $312.00, which represents a potential upside of 30.31% from current levels.
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Bottom-line on TSLA Stock
Tesla is facing significant challenges that reflect both internal and external pressures. Trade tensions between the US and China, coupled with political controversies and Tesla CEO Elon Musk’s involvement in politics, are impacting the company’s market performance and consumer sentiment. Compounding these issues is the growing competition in the electric vehicle sector, notably from companies like BYD, which are capturing market share with innovative technologies and competitive pricing. Analysts are cautious, reducing price targets and highlighting concerns over brand perception and demand. While Tesla still holds upside potential, the path ahead appears less certain, and investors may want to approach the stock with caution.