Tesla shares slump after European sales fall

Shares of electric vehicle manufacturer Tesla experienced a significant drop, plummeting by over 9%, driven by a nearly 50% decline in sales across the European Union and the United Kingdom in January. This sales slump caused Tesla's market capitalization to fall below $1 trillion for the first time since November 2024, signaling investor concern.

Tesla is facing intense competition in the European market from Chinese and other manufacturers. Furthermore, an analyst pointed out that Tesla CEO Elon Musk's political stances on both sides of the Atlantic have sparked controversy, potentially impacting sales negatively. This increasing political scrutiny adds another layer of challenge for the company.

Contrary to the overall European electric vehicle sales trend, which saw growth exceeding a third, Tesla's sales in the EU, the European Free Trade Association, and the UK fell by over 45%, with the EU alone experiencing a drop of over 50%. This decline follows Tesla's first sales decrease in over a decade last year, attributed to weakening demand and the rise of competitors.

Russ Mould, investment director at AJ Bell, stated that the primary factor behind the January sales decline is likely the increasingly fierce market competition. Chinese manufacturer BYD is making significant progress, partly due to its standard inclusion of features that other manufacturers charge extra for. Mould also suggested that some car buyers may be taking a "principled stand" against Musk's political interventions.

Musk has sparked controversy in the United States for his involvement in cutting US development funds and significantly reducing US federal funding. In the UK, he has supported imprisoned far-right activist Stephen Yaxley-Lennon (also known as Tommy Robinson) and repeatedly criticized UK Prime Minister Sir Keir Starmer. Musk has also supported the far-right German party Alternative für Deutschland (AfD), congratulating its leaders after the party achieved a record second-place finish in elections.

Mould added that Tesla's stock price previously surged after the US election due to Musk's close relationship with Donald Trump, with Musk describing himself as the US President's "number one partner," which investors believed would benefit his businesses. However, Trump does not support electric vehicles and has stated he would eliminate measures promoting their adoption. "I don't know how anyone could think that's good for Tesla," Mould said. In addition, general market concerns about the path of interest rate cuts and anxieties over Trump's tariff plans may also be contributing to the stock decline.