Tesla shares have dropped more than 9% after sales in the EU and UK fell by nearly half in January, pushing the company’s valuation below $1 trillion for the first time since November 2024.
Tesla shares drop 9% as EU sales plunge nearly 50%
The decline comes as Tesla faces intensified competition in the European market from various manufacturers, particularly from Chinese companies like BYD. While overall electric vehicle sales in Europe grew by more than a third in January, Tesla’s sales plummeted by over 45%, with more than a 50% drop specifically within the EU.
This sales slump follows Tesla’s first annual sales decline in over a decade last year, attributed to faltering demand and the rising momentum of competitors. According to BBC, investment director Russ Mould of AJ Bell indicated that the primary factor behind the January sales downturn is likely increased competition. Companies like BYD are gaining traction by including standard features that other manufacturers charge extra for.
Mould also suggested that some consumers may be taking a “principled stand” against CEO Elon Musk due to his controversial political engagements, which have drawn criticism on both sides of the Atlantic. His political interventions include actions in the US aimed at reducing federal funding and support for far-right figures in the UK, such as Stephen Yaxley-Lennon, known as Tommy Robinson, and his criticisms of Prime Minister Sir Keir Starmer. Musk has also expressed support for the far-right AfD party in Germany.
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Peter Bardenfleth-Hansen, a former senior director at Tesla’s Europe, Middle East and Asia division, told BBC that Musk’s political image appears to be detrimental to Tesla’s market perception. He noted that while Musk may attract a certain fanbase, they do not comprise the demographic likely to purchase Tesla vehicles, creating a challenge for the company.
The share price decline coincided with broader market trends, as Tesla shares plunged over 8% on Tuesday, resulting in a market cap drop to approximately $981 billion. Year-to-date, the stock is down 24% and has fallen over 35% from its peak closing on December 16. Musk’s personal wealth also took a hit, decreasing by over $100 billion, although he remains the world’s richest individual, with a fortune estimated at around $380 billion.
In January, Tesla’s anticipated upgrade to its partially automated driving system disappointed users, further contributing to shareholder anxiety. Feedback indicated that the “navigate on city streets” feature did not meet Musk’s promises regarding self-driving capabilities. Competing brands in China, like Xiaomi, provide similar technology at little to no additional cost.
Concerns have also arisen regarding Musk’s attention being divided between Tesla and his role in leading President Trump’s Department of Government Efficiency in Washington, which may be distracting him from managing his companies effectively. Critics have noted that Musk’s radical political rhetoric has provoked backlash, including protests against Tesla locations.
In its fourth quarter, Tesla reported earnings and sales below analysts’ expectations, with an 8% drop in automotive revenue and a 23% decline in operating income. The company attributed part of this downturn to reduced average selling prices across its aging lineup, which includes the Model 3, Model Y, Model S, and Model X. In California, Tesla sales fell 11.6% during this same quarter, despite being its largest domestic market.
Tesla’s stock was trading around 112 times expected earnings, surpassing its five-year average PE ratio of 93, while Ford and GM’s stocks were valued at eight and seven times earnings, respectively. Despite the current challenges, Tesla anticipates launching a new, lower-priced electric vehicle and aims to develop a paid autonomous car service.
Featured image credit: Tesla Fans Schweiz/Unsplash
