Shares of Tesla opened 5.2% down on 2 April following the announcement that sales of its electric cars (EVs) had fallen to their lowest level for nearly three years.
However, they quickly gained ground, gaining as much as 4.9% later in the session. The reversal followed a report from Politico which suggested CEO Elon Musk will soon step back from his government activities.
Tesla sold 336,681 vehicles during Q1 of 2025, around 9% less than it did in the same period last year. Tesla hasn’t posted such low quarterly deliveries since Q2 2022 – when the Russian invasion of Ukraine sent global markets into turmoil.
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The figures follow on from disappointing sales the previous quarter, when the announcement of 495,570 deliveries – short of the 498,000 analysts had forecast – saw Tesla’s share price fall 6.1% on 2 January.
According to the latest information, Tesla (NASDAQ:TSLA) is one of the most popular stocks among retail investors on the interactive investor platform. However, its share price has been hit hardest by the Magnificent Seven selloff that has driven down the stock market and seen the S&P 500 fall 4.6% in the first quarter, with Tesla shares falling around 30% in the year to date.
The slump has been driven by a backlash against Tesla’s increasingly politically-active CEO Elon Musk, which appears to have tanked Tesla’s car sales.
“There’s no way to sugarcoat it, Tesla’s first-quarter delivery numbers are a disappointment,” says Matt Britzman, senior equity analyst, Hargreaves Lansdown. “A drop from last year is no surprise, but the scale is worse than many had expected.”
Will Elon Musk step back from government responsibilities?
According to a report by Politico, which cites three White House insiders who spoke to the publication anonymously, president Donald Trump has told close confidants that while he is pleased with Musk’s work at the newly-created Department of Government Efficiency (DOGE), the pair have decided that Musk will step back from his role supporting the government.
While it appears to be a joint decision, Politico claims that some White House insiders had come to see Musk as a political liability.
According to Politico, Musk will leave DOGE around May or June, when his time as a “special government employee” expires. However, the report also cites insiders saying that Musk is likely to remain a presence around the White House even after stepping back from his current position.
Why are Tesla’s sales falling?
There are numerous headwinds facing Tesla’s share price, one of which is its fundamental business performance – EV sales. The reason this is falling is twofold.
Firstly, Tesla faces intensifying competition, particularly in China, which is home to the world’s largest EV market. There, it is being squeezed by local incumbents, particularly BYD.
Latest sales figures show BYD’s deliveries increased 23% year-on-year in March – 19% if its plug-in hybrids are excluded. In the quarter as a whole, battery electric vehicle sales increased 39% to over 416,000, far ahead of Tesla’s equivalent.
BYD’s cheaper pricing has also given Tesla a headache over recent years, exerting downward pressure on its own model prices.
The second drag on Tesla’s sales is less business, more politics.
In backing Donald Trump heavily during last year’s US presidential election, and through his subsequent involvement at DOGE, Musk has made Tesla a target of economic activism.
Left-leaning Americans distraught at DOGE’s slashing of federal agencies have boycotted Tesla purchases and, in extreme cases, have vandalised the cars.
Meanwhile, Musk and Tesla have also become symbols for Europeans angry at the Trump administration for seemingly wiping its hands of the US's previous role as a guarantor of European security.
As Europeans spend more on defence, they are spending less on Teslas: Reuters analysis of ACEA data released yesterday (1 April) showed that new Tesla sales in France and Sweden fell for the third consecutive month in March.
The upshot is that, at the same time that competition is squeezing Tesla’s margins, politics is dampening its demand.
Should you buy Tesla shares despite falling sales?
Britzman adds to this analysis by highlighting downtime at Tesla’s factories as it refreshed its best-selling car, the Model Y, which he believes “should be a major hit” and was the best-selling car in China during March.
He also highlights a 160% year-on-year increase in energy deployment to 10.4GWh. This is a high-margin segment for Tesla, which “should help to balance out the earnings impact of the delivery disappointment”.
Despite its share price slump this year, Tesla stock is by far the most expensive of the Magnificent Seven based on past and projected earnings; as of 1 April, Tesla traded at nearly 100 times forward earnings and over 125 times trailing earnings.
That valuation rests on the assumption that Tesla will be the biggest winner from the eventual adoption of autonomous vehicles, or self-driving cars. Ultimately, if that turns out to be true, then a few weak quarters of EV deliveries won’t hold back Tesla’s share price in the long run.
However, if you are considering buying Tesla shares now, it’s worth remembering that there will be plenty of competition as the self-driving car market picks up. BYD in particular could be emerging as a major player in the market, having rolled out free driver assistance features on most of its models in February.
In the meantime, Tesla stock is expensive and likely to move around lots in the short term.
“It’s rare to see sentiment toward a company so closely tied to a polarising White House, and until Musk pulls his focus back to Tesla, shares will remain volatile,” said Britzman before the Politico report.
As such, Tesla bulls will be pleased that Musk is reportedly soon to step down from his government activities.
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