Tesla (TSLA) stock surged after President Donald Trump won last November’s election, based on his relationship with CEO Elon Musk. But that relationship is likely a driving factor behind the erasure of much of those gains.
The stock closed at $302.80 per share on Tuesday, marking a 37% dive from a peak of $479.86 in mid-December. That’s also the lowest Tesla has closed since Nov. 7, just two days after the election, and it has pushed the company’s market capitalization to less than $1 trillion.
In early trading on Wednesday, shares rose by more than 1%, as some investors bought the dip.
While Tesla has been slowly shedding some of its post-election gains over the past few months, the latest decline was partially a reaction to a major decline in sales abroad. The European Automobile Manufacturers’ Association on Tuesday reported that Tesla’s sales in the region fell 45% in January, even as the electric vehicle market surged.
In California, traditionally Tesla’s biggest domestic market, new vehicle registrations fell 11.6% last year, according to the California New Car Dealers Association.
“Californians’ love affair with electric vehicle giant Tesla may have peaked,” the group noted in April.
Musk has spent much of his time since the election working alongside Trump in Washington, often sleeping in his government office and posting on his social media site X, formerly Twitter. His Department of Government Efficiency — which he acts as the face of in an “unofficial” capacity, but is actually led by someone else, according to the White House — has been pushing cost-cutting at multiple government agencies, even those that regulate Musk’s companies.
Musk also took time out of his schedule to endorse Germany’s far-right Alternative for Germany party and participated in an online campaign to convince British officials to release far-right agitator Tommy Robinson.
His political activities, which included his massive financial support of Trump during the presidential campaign, have cost Tesla about $15 billion in brand value, Brand Finance told CNBC last month. Antagonism toward the CEO was a big factor in Tesla’s declining reputation and sales, although the company’s aging products also had a part to play.
“I believe the recent pullback is largely related to investors recalibrating their delivery expectations for 2025,” Deepwater Asset Management’s Gene Munster noted. “The catalyst to the adjusted expectations has been Musk’s increased political visibility, alienating buyers.”
Tesla’s new push to deliver autonomous driving features in China has left some consumers disappointed, Reuters reported Tuesday. Competition in the world’s biggest auto market has been heating up, with chief rival BYD (BYDDY) beginning to offer assisted driving software to mass market buyers. Xiaomi’s (XIACF) SU7, which has been a major hit in the market, offers similar features for free.
And behind all of that, Tesla’s fourth-quarter earnings fell below analysts’ estimates. Deliveries also narrowly missed the automaker’s own targets for the year, even as Musk forecasted a “return to growth” in 2025.
The company is betting on a revamped Model Y SUV, the company’s best-selling vehicle, and interest in autonomous technology to keep investors happy. Tesla plans to launch a ride-share service later this year using Model Y and 3 vehicles equipped with self-driving software and ramp up production of its Optimus humanoid robots.