Tesla’s stock is now nearly in bear market territory from Thursday’s close of $252.40, down over 7.3%. This collapse follows in stark contrast to the firm’s staggering 23% surge just a day earlier. That rally was the second-sharpest gain on record since at least 2013. Tesla had a momentary lifeline, but it too is under the gun. The company is now 38% for the year, the biggest drop of any big technology company.
Tesla’s stock has been the most volatile in the world this year. In fact, it has gone up or down by at least 5% on 19 separate days! This strange behavior has been widely chalked up to many things, such as fluctuations in market sentiment and pressure from outside forces surrounding the company. The electric vehicle manufacturer tops the charts with the highest short interest of any public company. It has peaked at over 80.5 million shares shorted, on a float of just 2.8%! Beyond that, one of the reasons Tesla is one of the four largest equity shorts by notional value at $17.9 billion.
Tesla’s troubles have been greatly worsened by the toughening battleground that it has found itself in. Today, the company has its most complex parts and materials supplied from China, Mexico and other foreign countries. This dependence has caused worries about its capacity to keep up production given current geopolitical tensions, including the fear of a future tariff. U.S. Treasury Secretary Scott Bessent commented on broader economic implications, stating, “China’s business model is predicated on this incredible imbalanced economy, and exporting low-cost goods – and subsidized goods – to the rest of the world.”
The decline in Tesla’s sales across Europe, particularly noted in data from the European Automobile Manufacturers’ Association (ACEA), further complicates its outlook. Tesla’s announcement today comes after, in that first quarter, the automaker posted a significant decline in deliveries. This trend has put up red flags for investors and analysts alike.
Yet Tesla still has enormous operational challenges to overcome. Besides that, brand degradation and mounting antagonism in Europe have come up, particularly after CEO Elon Musk supported Germany’s far-right AfD celebration. Since this controversial political endorsement, Tesla’s public image has taken a hit with protests and even criminal acts against Tesla’s facilities and vehicles.
With new tariffs still creating uncertainty over production costs at Tesla, analysts will be glued to the company’s margin outlook. UBS analysts highlighted the potential for continued volatility in Tesla’s stock performance, stating, “We expect Tesla shares to be volatile but downward sloping considering the rich valuation (especially compared to the other Mag7 stocks) in a skittish market.”
Despite these challenges, Tesla’s future sales growth remains contingent upon its ability to manufacture and sell a high volume of its cars and battery energy storage systems across Europe and Asia. Competitors are coming into the EV space and expectations of consumers shifting. Yet this is the world Tesla needs to reestablish itself within.