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Tesla’s stock has always been a rollercoaster, with dramatic peaks and equally sharp declines. But recent movements in the market suggest that this time, the challenges might be more than just a temporary setback. With a 40% drop year to date and a bearish outlook from several analysts, questions are swirling about Tesla’s future as it shifts its focus toward AI-driven innovation.
At the same time, concerns about demand, increased competition, and geopolitical uncertainties are weighing on the stock. Financial experts from Fundovix will explore the critical factors shaping Tesla’s trajectory and what investors should consider moving forward.
Tesla’s Declining Stock and Analyst Downgrades
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Tesla’s stock has taken a significant hit in 2024, marking its worst performance among the so-called “Magnificent Seven” tech stocks, which include Apple, Amazon, Nvidia, Google, Microsoft, and Meta. UBS analyst Joseph Spak recently reaffirmed his Sell rating on Tesla, cutting his 12-month price target from $259 to $225. The broader Wall Street consensus places Tesla’s price target at $239, showing that even among optimists, expectations have tempered.
Spak‘s concerns revolve around weakening demand for the Model 3 and Model Y, Tesla’s two best-selling vehicles. He predicts a 5% year-over-year decline in first-quarter deliveries, with a 26% sequential drop. His estimates are also 13% below the current consensus, signaling a potential gap between investor hopes and reality. Despite Tesla’s aggressive expansion into AI and robotics, analysts believe these projects are long-term plays that don’t justify the current premium valuation, with the stock still trading at 90 times 2025 earnings estimates.
Weak Sales in Key Markets
Tesla’s challenges extend beyond Wall Street downgrades. Sales figures across critical markets suggest a demand problem that isn’t improving. In China, Tesla sold just 26,677 vehicles in February—a decline of 11.16% year-over-year and 20% from January. Meanwhile, in Australia, Tesla’s sales plummeted by 72% compared to the previous year, highlighting international struggles.
Even in the U.S., used Tesla prices are dropping, with Cybertrucks, Model 3s, Model Ss, Model Ys, and Model Xs all seeing price cuts. Data from CarGurus shows that Tesla’s average vehicle price has fallen 4% over the past 90 days, with the steepest declines in Cybertrucks and Model S vehicles. The company is also facing rising competition from legacy automakers like General Motors and Ford, as well as an increasing consumer shift toward hybrid vehicles rather than fully electric ones.
The Impact of Trade Policies and Tariffs
Geopolitical developments have further complicated Tesla’s outlook. New tariffs from the U.S. government are expected to raise costs for Tesla and other automakers, with an additional 25% tariff on steel and aluminum—two essential materials in vehicle manufacturing. Additionally, ongoing trade tensions with China pose supply chain risks, as a 2023 study found that 40% of the materials used in Tesla’s batteries come from Chinese suppliers.
As Tesla navigates these cost pressures, production efficiency and pricing strategies will be critical in maintaining its margins. But with prices already declining due to weaker demand, any further cost increases could squeeze profitability.
The AI and Robotics Pivot: A Long-Term Bet
Despite the troubling sales figures, Tesla continues to position itself as more than just an automaker. Tesla’s CEO has repeatedly emphasized the company’s transition toward AI, humanoid robots, and autonomous driving. The long-term vision includes a fleet of robotaxis and Tesla’s Full Self-Driving (FSD) technology, which some investors see as the company’s next major revenue driver.
Tesla’s most vocal supporters, such as Ark Investment’s Cathie Wood, argue that the biggest valuation unlock will come from its AI initiatives. Wood believes Tesla’s robotaxis will be safer than human drivers by the end of the year, potentially disrupting the ride-hailing industry. However, skeptics argue that the stock is already priced for perfection, with these futuristic projects factored into its current valuation—even as challenges in its core business persist.
The Road Ahead for Investors
Wall Street analysts have started to lower their earnings forecasts for Tesla ahead of its April earnings report. Over the past 30 days, estimates for 2025 and 2026 earnings per share have dropped by 3.4% and 2.6%, respectively. If Tesla’s upcoming results fail to show meaningful progress in sales or AI advancements, further downward revisions could follow.
While Tesla has a history of proving skeptics wrong, investors should remain cautious. The company’s ability to execute its AI ambitions while maintaining strong vehicle sales will determine whether this is just another temporary downturn—or the beginning of a more significant decline.
Conclusion
Tesla’s current struggles highlight the delicate balance between innovation and financial performance. While its vision for AI and autonomous driving is ambitious, short-term demand concerns, increasing competition, and geopolitical headwinds cannot be ignored. The company has survived downturns before, but its path forward is more uncertain than ever. Investors will need to weigh Tesla’s long-term potential against the immediate risks as financial strategists from Fundovix continue to monitor its evolving story.
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