The “bromance” between United States President Donald Trump and tech billionaire Elon Musk was on full display on Tuesday when the White House South Lawn was transformed into a miniature Tesla showroom.
Musk lined up Tesla cars to showcase the electric car producer’s latest innovations while Trump promised to brand anyone vandalising a Tesla car a “domestic terrorist” following reports of a spate of vandalism and arson attacks on Tesla cars across the country.
Trump, known for his strong stance on domestic manufacturing and business leadership, has given Musk a prominent role in his new administration as leader of the new Department of Government Efficiency (DOGE), which claims to have uncovered “billions and billions of dollars in waste, fraud and abuse” in the US federal government – claims for which Musk and Trump have yet to show significant evidence.
Meanwhile, Tesla shares, which are listed on the NASDAQ, are floundering. On Monday this week, they plummeted by 15 percent to end the day at $215 – the worst day for the stock since 2020 and its lowest level since Trump won the presidential election in November. The shares bounced back a little after Tuesday’s presidential plug for Tesla cars to $231.83 in the morning, before levelling out at about $235 by the end of the day. On Friday, the shares were were due to open at around $240.
Tesla stock has been in freefall since its heady highs of more than $435 in mid-December, 2024. So why is the car manufacturer doing so poorly when its owner appears to be flying high at the White House?
Why is Tesla’s share price falling?
Despite performing well following the November presidential election in the US, Tesla’s stock was volatile during 2024 overall and has declined sharply since the start of this year. Robert Scott, a specialist in international economics and trade policy, said a fall in the share price was inevitable due to its “extreme overvaluation”.
“Tesla’s stock was highly overvalued, with one of the highest price-to-earnings ratios ever recorded,” Scott told Al Jazeera. This means the price of the stock was very high compared with the profits the company was generating. “This indicates that the stock price was inflated relative to market fundamentals.”
William Lee, chief economist at the Milken Institute, said the fall in the share price has come about as a result of delays to the launch of new Tesla products.
“The new refresh for the Tesla Model Y continues to be delayed, and more importantly, no new models have been introduced,” Lee said.
What has happened to sales of Tesla vehicles?
There has been a marked decrease in sales in Europe and elsewhere. According to data from Business Insider, the business trade news outlet, in February, sales were 76 percent lower in Germany than they were the previous year even though overall sales of electric vehicles were 31 percent higher. Sales in Germany also fell in January following Musk’s endorsement of the far-right AfD party. In Norway, Denmark and Sweden, sales fell 40 percent year on year in February and dropped by 26 percent in France. The company has also been suffering from organised boycott campaigns in the United Kingdom and Portugal.
Further east, Tesla sales plummeted by nearly 50 percent, year on year, in China in February and by a massive 71 percent in Australia.
The main reason for these falls in sales is increased competition from traditional automakers as well as new, up-and-coming electric vehicle companies, particularly in China, where automaker BYD reported a 90 percent rise in sales in February.
China is Tesla’s second-largest market but government policies there are increasingly favouring domestic manufacturers.
Tesla has repeatedly cut vehicle prices in a bid to maintain demand in countries including the US and China. While this strategy has helped to boost short-term sales, experts say, it has also reduced overall earnings, raising concerns among investors about long-term profitability.
According to Lee, another major issue weighing on investors’ minds is Tesla’s failure to deliver innovations in self-driving technology and other key areas such as robotics.
“Investors are looking for progress on self-driving, which keeps getting put off, and other disappointments in robotics weigh on investor sentiment,” he said.
Without new models or major technological advancements, Tesla is struggling to maintain its reputation as an industry leader, which has further contributed to its stock decline, he added.
How will Musk be personally affected by all this?
Elon Musk also owns several other companies and ventures across various industries, including X, the social media platform formerly known as Twitter, which he bought for $44bn in 2022.
However, his personal wealth is closely tied to Tesla’s stock price.
The acquisition of Twitter has become a financial burden, especially as advertisers pull back from it following Musk’s endorsement of various right-wing parties in Europe and his use of X to broadcast his pro-Trump stance. The billionaire was a major financial supporter of Trump’s presidential campaign last year, spending more than $250m while making personal appearances on Trump’s behalf.
His political activities have caused anger among some in the US, culminating in protests and arson attacks at Tesla dealerships, factories and charging stations. There has been a spate of attacks on Tesla vehicles around Europe as well, including in Germany where many vehicles have had their tyres slashed.
Musk’s activities at DOGE could make him a target for more ire, experts say.
DOGE’s moves to scale back the federal government budget and cut thousands of jobs will likely “push the economy closer to a recession,” according to Scott. “A recession will hit highly leveraged stocks like Tesla particularly hard.”
Musk’s political activities have prompted concerns among investors, too, Lee said.
“Musk’s active participation in the US government is viewed as a distraction from his ability to drive his companies to produce the innovations that he has promised on time,” he said.
How will Trump’s trade policies affect Tesla?
While President Trump does not have a direct role in Tesla’s current struggles, his policies, ongoing economic decisions and perceived influence over Musk could have significant implications for the company, experts say.
For instance, Trump has historically opposed subsidies for electric vehicle producers and emissions regulations which ultimately benefit companies like Tesla.
Trump has also imposed sweeping tariffs on countries including China – which Tesla still heavily relies on for exports. The continuing trade war with China could disrupt Tesla’s supply chain and reduce its competitiveness in a crucial market.
“Trump’s tariffs are causing other countries to impose countervailing tariffs on US exports. This will hurt Tesla sales abroad,” Scott said.
Trump’s efforts to reverse clean energy policies from the Biden administration could also further weaken demand for electric vehicles, including Teslas, Scott added.
What else is holding Tesla back?
Beyond Tesla’s financial challenges, Musk’s expanding portfolio of businesses has raised concerns with investors about his ability to effectively lead the company.
Scott also pointed to Musk’s involvement in Dogecoin, a cryptocurrency project, something he has no prior experience with before he first tweeted about it in 2020, triggering a 20 percent rise in the value of the cryptocoin created by software engineers in 2013. In April 2021, Musk tweeted about Dogecoin again, causing a 100 percent jump in its value. Then in December that year, Musk announced that he would accept Dogecoin as payment for Tesla merchandise. Since then, Musk has been facing a $258bn lawsuit filed in New York in 2022 alleging he artificially inflated the price of Dogecoin through his social media influence.
“Musk’s increased demands on his attention, as he attempts to run both DOGE and his other businesses, means that some of them may suffer simply from lack of his attention,” Scott said.
Musk’s increasingly right-wing political stance may also have affected Tesla’s brand perception. Many of the vehicle’s owners tend to be environmentally conscious consumers who support sustainable energy initiatives and are not natural Trump supporters, experts say.
According to Lee, Musk appears to be making a deliberate choice to engage in US government affairs at the expense of Tesla’s performance.
“While he is trying to be patriotic and do good for the country, his investors and companies are being sacrificed for the good of the future of the United States,” Lee said.
