Tesla’s Stock Just Skidded, China (and Elon) Might Total It

Elon Musk is busy tweeting and politicking while Tesla’s European sales collapse and China’s EV makers crank up the pressure, investors are not amused.

THE GIST

Tesla stock just hit the brakes harder than an autonomous Tesla spotting a kid at a crosswalk. An 8% drop Tuesday knocked its market cap below $1 trillion as European sales crashed. Meanwhile, Elon’s busy with Twitter rebrands, chainsawing the federal government, and his other business (we assume) while China cranks out cheaper, better EVs.

WHAT HAPPENED

Tesla’s European sales plummeted 45% in January, even as the rest of the EV market in the region grew by 37%. That’s not a dip. It’s a faceplant. Investors, already uneasy about Tesla missing delivery targets last year, weren’t thrilled.

The stock tumbled to $305 per share, bringing Tesla’s market cap down to $981 billion, which is still enormous but no longer the untouchable EV juggernaut it once was. For comparison, Ford and GM, combined, are worth less than half of that, yet Tesla is still trading at a wild 112 times expected earnings (vs. Ford’s measly 8).

Meanwhile, over in China (Tesla’s biggest international market) local competitors are making moves. Li Auto just unveiled photos of its first-ever fully electric SUV, sending its stock soaring 12%... on photos. And that’s before you even factor in BYD, XPeng, and Nio, all of whom are very happy to eat Tesla’s lunch.

WHY IT MATTERS

Tesla’s entire business model rests on two things: maintaining high margins and Elon Musk’s ability to keep the hype machine running. Both of those are under siege.

In China, Tesla already had to slash prices to stay competitive, which has been eating into profits. And now, with Li Auto, BYD, and others pushing into the fully electric SUV space (where Tesla should be dominating), the pressure is mounting. China already owns 27% of the global EV market (more than Europe and the U.S. combined) and it’s using that scale to produce cheaper, high-tech vehicles faster than Tesla can tweet about Dogecoin.

Speaking of distractions, let’s talk about Elon. Instead of focusing on Tesla, he’s currently:

• Fighting SEC lawsuits over his Twitter/X buyout.
• Trying to downsize the U.S. federal government (yes, really).
• Parenting at volume.
• Managing SpaceX, The Boring Company, and Neuralink.

Even die-hard Tesla bulls are starting to notice. It’s one thing when Musk is a quirky billionaire focused on innovation, but it’s another when he’s in every headline for reasons entirely aside from Tesla, and the stock is in free fall.

WHAT’S NEXT

This is shaping up to be a brutal year for Tesla. China flooding the market with cheaper, high-quality EVs is forcing Tesla into a margin-crushing price war. Europe is a trash can fire, and in the U.S., Musk’s political antics are hurting brand loyalty among customers who previously saw Tesla as a status symbol for the eco-conscious.

There’s one lifeline: the much-hyped “cheaper” Tesla model and the promised self-driving taxi fleet. But given Musk’s history of, let’s say, optimistic timelines, don’t hold your breath.

© MOBY TECHNOLOGIES