The last few months have seen a wind of protest against Tesla CEO; Elon Musk, and calls for a boycott of all his companies especially the car business. Shares in electric car giant Tesla have taken a significant hit, plummeting over 9% following a staggering drop in sales across the EU and UK, where figures fell by nearly half in January. This downturn has pushed Tesla’s market valuation below the $1 trillion mark for the first time since November 2024, raising eyebrows and concerns among investors and analysts alike.
The Competition Heats Up
One of the primary culprits behind Tesla’s sales decline is the intensifying competition in the electric vehicle (EV) market. While Tesla’s sales faltered, the overall European electric car market saw a robust growth of more than a third in January, according to the European Automobile Manufacturers Association (ACEA). In stark contrast, Tesla’s sales in the EU, EFTA, and the UK plummeted by over 45%, with a staggering 50% drop in the EU alone.
This competitive landscape is being reshaped by aggressive newcomers, particularly Chinese manufacturers like BYD. These companies are gaining traction by offering features as standard that Tesla charges extra for, making them increasingly appealing to cost-conscious consumers. As AJ Bell investment director Russ Mould pointed out, the growing presence of these rivals is a significant factor in Tesla’s sales slump.
The Musk Factor: Controversial Political Moves
Adding to the complexity of Tesla’s situation is the controversial political landscape surrounding its CEO, Elon Musk. Analysts suggest that Musk’s political interventions may be alienating potential customers. His involvement in reducing U.S. development funds and his support for contentious figures and causes have raised eyebrows on both sides of the Atlantic.
In the UK, Musk has publicly supported jailed far-right activist Stephen Yaxley-Lennon, known as Tommy Robinson, and has been critical of Prime Minister Sir Keir Starmer. Meanwhile, in Germany, he has shown support for the far-right Alternative for Germany (AfD) party, congratulating its leader after a strong electoral performance. These actions may be prompting some consumers to take a “principled stand” against purchasing Tesla vehicles, as they align their buying choices with their political beliefs.
The Toxicity of Musk’s Image
The question of whether Musk’s political persona is too toxic for Tesla’s brand has been raised by industry insiders. A former senior director of Tesla’s Europe, Middle East, and Asia division, Peter Bardenfleth-Hansen, indicated that Musk’s controversial image is indeed contributing to the company’s struggles. He noted that while Musk may be gaining a following among certain demographics, they do not represent the core customer base that drives Tesla’s sales.
Musk’s past close ties with Donald Trump initially seemed to bolster Tesla’s stock, as investors anticipated favorable conditions for the company. However, Trump’s lack of support for electric vehicles and his plans to cancel initiatives aimed at boosting EV ownership have left many questioning the wisdom of this alignment.
Market Sentiment and Economic Factors
Beyond the direct impact of competition and Musk’s political activities, broader market sentiments are also at play. Investors are grappling with uncertainty regarding interest rate cuts and potential tariff implications stemming from Trump’s policies. This overall market skittishness can exacerbate the volatility of Tesla’s stock, making investors wary of the company’s future prospects.
The Road Ahead
As Tesla navigates these turbulent waters, the interplay of competition, political controversies, and market dynamics will be crucial in determining its trajectory. The company’s ability to adapt to the evolving landscape, both in terms of product offerings and public perception, will be key to regaining its footing in the increasingly crowded electric vehicle market.
