Tesla Stock Plummets: Has Elon Musk’s Electric Vehicle Era Ended?

Analyzing Tesla’s Decline and Future Prospects /Reuters

Tesla’s stock price, once soaring to unprecedented heights, has taken a dramatic tumble, sparking intense debate among investors and analysts about whether Elon Musk’s electric vehicle (EV) dominance is nearing its end. The company’s market capitalization has shrunk by nearly half in just three months, plummeting from a peak of $1.5 trillion on December 17, 2024, to roughly $714 billion after a steep 15 percent drop on a single day, wiping out over $125 billion in value. This sharp decline followed UBS’s lowered forecast for Tesla’s first-quarter deliveries, aligning with a broader market selloff driven by tariff concerns and recession fears. Despite this downturn, Tesla’s valuation still dwarfs that of traditional automakers like General Motors and Ford, largely due to investor faith in Musk’s ambitious vision of transforming Tesla into an artificial intelligence (AI) powerhouse with innovations like robotaxis and humanoid robots. However, with declining EV sales, shrinking profits, and growing backlash against Musk’s political involvement, many are questioning whether the Tesla stock rally, long fueled by optimism rather than fundamentals, can persist.

The electric vehicle giant’s financial performance has raised red flags for even its most ardent supporters. Tesla’s core EV business, which generates nearly 90 percent of its revenue, saw its first annual sales decline in over a decade in 2024, dropping 1.1 percent to 1.8 million units. This downturn reflects weakening demand in key markets like California, where sales fell 11.6 percent in the last quarter of 2024, and China, where February 2025 sales plummeted 49.2 percent year-over-year. To combat slowing growth, Tesla has slashed prices on its aging Model 3 and Model Y vehicles, squeezing profit margins. In January 2025, the company reported a 20 percent drop in annual operating profit, with revenue falling short of Wall Street expectations. Meanwhile, competition is intensifying, particularly from China’s BYD, which overtook Tesla as the world’s top EV seller in 2024 with 4.2 million units, bolstered by a thriving hybrid vehicle segment. BYD’s market cap, at less than a sixth of Tesla’s, underscores the stark valuation gap, as Tesla trades at a forward price-to-earnings ratio nine times higher than the average of the next 25 largest automakers. This disparity highlights a critical issue: Tesla’s stock price hinges less on its current EV success and more on speculative bets on Musk’s futuristic promises.

Musk has shifted Tesla’s focus away from affordable EVs toward a bold pivot to autonomous driving technology, particularly robotaxis, as a cornerstone of the company’s future growth. Once heralded for proving EVs could be profitable with models like the Model 3 and Model Y, Tesla abandoned plans for a widely anticipated $25,000 Model 2 in 2024, a move that disappointed investors expecting mass-market expansion. Instead, Musk is banking on robotaxis, unveiling the Cybercab concept in October 2024 and promising production by 2026, alongside fare-collecting robotaxi services in Texas by June 2025. Analysts attribute a significant portion of Tesla’s valuation to these ventures, with firms like Bank of America estimating robotaxis could account for half of Tesla’s worth, and Ark Investment Management projecting a $2,600 stock price by 2029, driven largely by autonomous ride-hailing revenue. Yet, skepticism abounds. Tesla’s reliance on cameras and AI, eschewing radar and lidar used by competitors like Waymo, has drawn criticism for safety concerns, especially given lawsuits and federal probes into crashes involving its Full Self-Driving system. Regulatory hurdles also loom large, particularly in California, where strict testing requirements could delay deployment, despite Musk’s political influence under the Trump administration potentially easing federal oversight.

Adding complexity to Tesla’s challenges is Elon Musk’s increasingly polarizing political persona, which appears to be alienating customers and impacting sales. Musk’s deep involvement in U.S. President Donald Trump’s administration, including spending over $250 million to support Trump’s 2024 election and taking a senior advisory role, has sparked protests and boycotts. In Europe, where Tesla sales dropped 45 percent from January 2024 to 2025, Musk’s endorsements of far-right movements have fueled backlash, with vandalism at showrooms and social media campaigns reflecting consumer discontent. This political entanglement coincides with Trump’s push to eliminate EV subsidies, a policy shift Musk downplays but which could erode Tesla’s cost advantage over rivals. The Cybertruck, Tesla’s latest offering, has also underperformed, with only 38,965 units sold in 2024 against Musk’s initial 250,000-unit annual target, further straining the company’s growth narrative. As Tesla’s EV sales falter and its brand takes hits, the question looms: can Musk’s technological gambles offset these mounting pressures?

Despite these setbacks, Tesla retains a loyal base of investors who see Musk as a visionary capable of defying odds, much as he did when Tesla’s stock surged past $1.2 trillion in 2021 on the back of EV breakthroughs. Bullish analysts argue that robotaxis and the Optimus humanoid robot could catapult Tesla’s valuation far beyond its current $714 billion, potentially making it the world’s most valuable company. Ark’s forecast of $760 billion in annual robotaxi revenue by 2029 exemplifies this optimism, suggesting a future where Tesla disrupts transportation by slashing ride-hailing costs below personal car ownership. However, critics like GLJ Research contend that Tesla’s self-driving technology isn’t ready for prime time, warning that a premature rollout could expose its limitations and tank the stock further. With Tesla’s forward PE ratio dwarfing that of tech giants like Nvidia and Apple, and competitors like BYD offering free driver-assistance features that Tesla charges $8,000 for, the gap between Musk’s promises and Tesla’s reality is widening. As the company navigates declining EV demand, unproven AI ventures, and Musk’s controversial distractions, the era of Tesla’s gravity-defying stock run may indeed be fading, leaving its future hinging on whether Musk can once again turn bold visions into tangible success.