Tesla On Sale
Tesla’s stock was down 9% this morning and 20% year to date. At the time of this writing, the stock has rebounded by 4% showing that there is still quite a bid out there on big dips.
However, and a big however, the underperformance this year is a bad omen for the rest of the year, as Google posted pretty positive earnings the same day.
Many of the large AI companies are trading as if the AI trade still has legs.
Tesla to tank in a year when many tech firms are reaching new all-time highs shows how stale the business model is and how it is in a transition phase.
Many investors have already given up on Tesla, and other simple investors think Tesla has become too complicated to invest in because of its enigmatic leader, Elon Musk.
Violent sell-offs have characterized the price action in Tesla stock this yea,r driven by a combination of factors.
Earlier this year, the first quarter revealed a 16% decline in automotive revenue, with overall revenue dropping 12% year-over-year to $22.50 billion.
Auto revenue, Tesla’s core business, declined 16%, and revenue per vehicle dropped to $42,231, indicating weaker pricing power. Sales of Tesla’s best-selling Model Y and Model 3 fell 12%, and more expensive models, including the Cybertruck, saw a drastic 52% sales plunge. These figures signal a continued sales slump.
A significant factor contributing to the negative perception is the loss of regulatory credit revenue, a critical lifeline for Tesla’s profitability.
In Q1 2025, regulatory credits accounted for $595 million of Tesla’s profit; without them, the company would have reported a $189 million loss.
Historically, Tesla has earned billions by selling these credits to legacy automakers to offset their emissions penalties.
However, with competitors like Ford and General Motors ramping up their own electric vehicle (EV) production, this revenue stream is drying up. The impending expiration of the federal $7,500 EV tax credit by September 30, 2025, further exacerbates Tesla’s challenges, as it reduces the affordability of its vehicles and could dampen demand.
Tesla faces intensifying competition in the EV market. Rivals like Ford, General Motors, and China-based manufacturers such as BYD are offering competitive EVs with better fit-and-finish and advanced self-driving features at lower price points.
The company’s focus on futuristic projects like robotaxis and the Optimus humanoid robot, while ambitious, has failed to offset immediate concerns about weakening fundamentals.
Musk’s promises of a robotaxi service covering half the U.S. population by year-end and mass production of Optimus lack clear timelines and financial impact, leading to market disappointment over the lack of clarity on full self-driving (FSD) technology.
With declining sales, the selloff has to be a sign that the smart money believes the robot-taxi business is more hyper than reality.
The statement of the robo-taxi business rolling out to half the cities in the United States is beggar’s belief.
They will be lucky if it launches in a handful in a limited products.
I would still be a buyer of this stock on big drawdowns, but in no way should the reader chase this with the management and stock suffering a medium-term malaise caused by various factors.
