The “bromance” between President Donald Trump and tech billionaire Elon Musk was on display in full display Tuesday when the White House South Lawn transformed into a Miniature Tesla showroom.
Musk side-by-side Tesla cars to showcase the latest innovations from electric vehicle producers, and Trump has pledged to Tesla vehicles to destroy “domestic terrorists” following reports of vandalism and arson attacks in Tesla cars around the country.
Trump, known for his strong attitude towards domestic manufacturing and business leadership, has given Musk a prominent role in the new administration as a leader in the “US Federal Government” who claims that billions and billions of dollars of waste, fraud and abuse claim that Musk and Trump still show important evidence.
Meanwhile, Tesla stocks listed on Nasdaq are bumping into. This Monday, they plunged 15% to close the day at $215. This is the worst day for stocks since 2020, and the lowest level since Trump won the November presidential election. The stock bouncing back to $231.83 a.m. shortly after the presidential plug of the Tesla car on Tuesday, then leveling out at around $235 by the end of the day. On Friday, the shares were scheduled to open for around $240.
Tesla stocks fell free-fall from a heady high of over $435 in mid-December 2024. So, when owners appear to fly high in the White House, why are automakers doing so poorly?
Why is Tesla’s stock price falling?
Despite steady performance following the November presidential election in the US, Tesla stocks have been volatile throughout 2024, falling sharply since the beginning of this year. Robert Scott, an expert in international economics and trade policy, said stock prices would be inevitable due to “extreme overvaluation.”
“Tesla’s stock is highly overvalued and is one of the highest priced return ever recorded,” Scott told Al Jazeera. This means that the stock price is very high compared to the profits the company was generating. “This shows that the stock price has grown compared to the market basis.”
William Lee, chief economist at the Milken Institute, said the decline in stock prices was a result of delays in launching new Tesla products.
“New updates to the Tesla Model Y continue to be late and, more importantly, no new models have been introduced,” Lee said.
What happened to the sales of Tesla vehicles?
Sales in Europe and elsewhere have been significantly reduced. Business Trade News Outlets in February had 76% lower sales in Germany than last year, despite total electric vehicle sales being 31% higher. Sales in Germany also fell in January, thanks to the support of the far-right AFD party. In Norway, Denmark and Sweden, sales fell 40% year-on-year in February, while in France it fell 26%. The company also suffers from organized boycott campaigns in the UK and Portugal.
Furthermore, in the east, Tesla sales plummeted by nearly 50% in China from the previous year in February and 71% in Australia.
The main reason for these sales is the growing competition between traditional automakers and up-and-coming electric car companies, particularly in China, where automakers reported a 90% increase in sales in February.
China is Tesla’s second largest market, but government policies have made it increasingly popular among domestic manufacturers.
Tesla has repeatedly lowered the prices of its vehicles to maintain demand in countries including the US and China. The strategy has helped to promote short-term sales, but experts say it reduces overall revenue and raises concerns among investors about long-term profitability.
Another big issue that weighs the minds of investors, according to Lee, is that Tesla has failed to offer innovation in other important fields such as autonomous driving technology and robotics.
“Investors are looking for progress in autonomous driving, which continues to be postponed, and other disappointments in robotics are examining investors’ feelings,” he said.
Without new models and key technological advancements, Tesla has struggled to maintain its reputation as an industry leader, which further contributes to the decline in stock, he added.
How is Musk personally influenced by all of this?
Elon Musk owns several other companies and ventures in a variety of industries, including X, a social media platform previously known as Twitter, and bought it in 2022 for $44 billion.
However, his personal wealth is closely tied to Tesla’s stock price.
The Twitter acquisition has become a financial burden, especially as advertisers broadcast his Pro Trump stance following the approval of various right-wing political parties’ masks in Europe and his use of X, before pulling back from there. The billionaire was a leading financial advocate for President Trump’s presidential election last year, spending more than $250 million while making personal appearances on behalf of Trump.
His political activities sparked rage among some in the US, leading to protests and arson attacks at Tesla dealers, factories and charging stations. There have also been types of attacks on Tesla vehicles around Europe, including Germany, where many vehicles are cutting tyres.
Musk’s activities at Doge could potentially target him more rage, experts say.
Scott said the move to reduce federal budgets and cut thousands of jobs is likely to “bring the economy closer to a recession.” “The recession will hit particularly hard on highly utilized stocks like Tesla.”
Musk’s political activities have also sparked concern among investors, Lee said.
“Musk’s active participation in the US government is seen as a distraction from his ability to drive businesses to produce the innovations he has promised on time,” he said.
How will Trump’s trade policy affect Tesla?
While President Trump has not played a direct role in Tesla’s current struggle, his policy, ongoing economic decisions and recognition of his impact on Musk could have a great deal of significance for the company, experts say.
Trump, for example, has historically opposed to subsidies for electric vehicle producers and emissions regulations that ultimately benefit businesses like Tesla.
Trump is also leviing swept tariffs on countries, including China. Tesla still relies heavily on exports. The ongoing trade war with China could disrupt Tesla’s supply chain and reduce its competitiveness in key markets.
“Trump tariffs have caused other countries to impose countervailing duties on US exports, which will hurt Tesla sales overseas,” Scott said.
Trump’s efforts to reverse clean energy policies from the Biden administration could further undermine demand for electric vehicles, including Teslas, Scott added.
What else holds down Tesla?
Beyond Tesla’s economic challenges, the expanding portfolio of mask companies has raised investors concerns about its ability to effectively lead the company.
Scott also pointed to Musk’s involvement in the cryptocurrency project Dogecoin. He pointed out that he had no previous experience before he first tweeted in 2020, causing a 20% increase in the value of encryption created by software engineers in 2013. That year, in December, Musk announced that it would accept Dogcoin as payment for Tesla products. Since then, Musk has faced a $258 billion lawsuit filed in New York in 2022, claiming that he artificially inflated Dogecoin’s price through social media impact.
“The increasing demand for Musk’s attention means that some of them may simply suffer from his lack of attention, as they are trying to run both Doge and his other businesses,” Scott said.
Musk’s increasingly right-wing political stance may also have an impact on Tesla’s brand perception. Many vehicle owners tend to be green consumers who support sustainable energy initiatives and are not natural Trump supporters, experts say.
According to Lee, Musk appears to have made the intentional choice to engage in US government issues at the expense of Tesla’s performance.
“While he is patriotic and trying to do good for the country, his investors and businesses are being sacrificed for the future of the United States,” Lee said.