Tesla’s stock price plummeted by almost 6% on the 26th (local time). This decline is attributed to exhaustion following a short-term surge and concerns over the Donald Trump administration’s plans to impose tariffs on automobiles.
Tesla’s stock closed at $272.06, a 5.6% drop, ending a five-day rally where the stock had surged 27.9% from the 19th to the previous day. On this day, the White House announced that President Trump would unveil new tariffs on imported automobiles, and Trump later declared a 25% tariff on all vehicles imported to the U.S. starting April 2nd.
Despite reports of a significant drop in electric vehicle sales in Europe, Tesla’s stock had risen by 3.5% the previous day. According to the European Automobile Manufacturers Association (ACEA), Tesla registered 16,888 new cars across Europe in February, a sharp 40.1% decrease from the 28,182 units registered in the same period last year. On the other hand, the total sales of battery electric vehicles in Europe increased by 26% year-on-year in February. Despite the growing electric vehicle market, Tesla’s sales continued to decline, reducing its market share in Europe from 2.8% last year to 1.8% this year.
Over the first two months of this year, electric vehicle sales in Europe increased by 31%, whereas Tesla’s sales plunged by 43%. This trend is attributed to President Trump’s declared intent to impose tariffs on Europe and the declining image of Tesla CEO Elon Musk, known as a close ally of Trump.
Since President Trump took office on January 20th, Tesla’s stock has fallen by 36%. In February alone, the stock dropped by 28%, marking the largest monthly decline since December 2022.
RBC analysts pointed out that February’s decline in Tesla’s new registrations, down by about 11,000 units year-on-year, might not reflect “genuine demand.” They suggested that customers might be waiting for the soon-to-be-released upgraded Model Y or an anticipated “budget model” to be launched later in the year.
Tesla recently launched an upgraded version of the Model Y and plans to ramp up production to maximum capacity next month. Earlier this year, Tesla temporarily halted production at some factories to upgrade the Model Y production line.
William Blair analysts noted that Tesla’s vehicle supply was impacted by Model Y upgrades and increasing competition in China. They also mentioned that backlash against Musk’s political involvement extended beyond brand damage to vandalism of Tesla vehicles and stores. Nevertheless, William Blair maintained an optimistic view on Tesla’s energy storage business and the robotics taxi service, “Robo-taxi,” retaining a ‘buy’ rating.
Elon Musk announced plans to start the Robo-taxi service in Austin, Texas, in June. In contrast, Alphabet’s Waymo already provides unmanned vehicle services in Austin and several other cities.
Canaccord analyst George Gianarikas reported that Musk’s political activities may not have negatively impacted Tesla purchases as much as feared. A survey of over 1,000 people revealed that nearly two-thirds of respondents were more inclined to buy Tesla now than a year ago. Only 21% were less inclined, with 80% indicating they were influenced by the current political situation.
Despite concerns, tongues noted that Tesla’s stock and brand aren’t as adversely affected by Trump’s administration’s tariffs as initially thought. CFRA analyst Garrett Nelson suggested that considering Tesla’s recognition as “the most American-made car” by Cars.com from 2022 to 2024, the impact of tariffs might be minimal. With manufacturing facilities and parts procurement localized across major markets like the U.S., Europe, and Asia, Tesla’s production and delivery remain mostly regionalized.
President Trump remarked that the 25% tariff on imported cars could be neutral or potentially beneficial for Tesla. Meanwhile, Tesla is set to announce its first-quarter electric vehicle delivery numbers on April 2nd. Analysts surveyed by FactSet have lowered their average forecast to approximately 360,000 units, down from an earlier estimate of 414,000, representing a 7% decrease compared to last year’s first-quarter delivery of 387,000 units.