Tesla Issues Q2 Sales Warning

By the close of March 14, 2025, Tesla’s stock had fallen below 250, down over 50% in market value. This collapse correlates with dismal sales: China’s February wholesale volume halved to 30,688 units, German monthly sales plunged 76% to 1,429 units, and U.S. deliveries declined for four consecutive months.

Declining sales trends are intensifying globally. UBS, JPMorgan, and Goldman Sachs have all downgraded delivery forecasts and price targets. Goldman analysts also highlighted Tesla’s "fierce competition in autonomous driving systems" in China.

Tesla’s predicament

Amid rapid global EV market growth, Tesla confronts unprecedented competition. Emerging EV brands directly threaten its market position, while legacy automakers’ electrification efforts further squeeze its space.

Tesla’s China collapse is pivotal: its market share dropped from 7.8% in 2024 to 5.4%, with February 2025 wholesale sales halving year-over-year (-49.16%)—the lowest since August 2022. BYD’s sales surged 161% during the same period. China’s NEV retail penetration reached 49.5% by February 2025, with domestic brands holding 71.3% market share (CPCA data).

In China, BYD captured entry-level market share with plug-in hybrids priced competitively against gas-powered cars, while Li Auto and XPeng attracted buyers through differentiated products and services. Tesla’s Model Y and Model 3 are losing their price and technological edge.

Tesla faces severe headwinds in Europe: January 2025 deliveries fell 45% year-over-year, with core markets like Germany and France plunging over 70%. Rising consumer aversion to the brand is closely tied to Musk’s political activities.

European automakers are accelerating electrification. Volkswagen, BMW, and Audi have rolled out high-performance, long-range EVs while reducing costs through localized production, further eroding Tesla’s market share. Concurrently, EV subsidy cuts in Europe—France slashed its 2025 budget from €1.5 billion to €1 billion, with Spain following suit—have driven price-sensitive consumers to cheaper alternatives.

The effect of “New Story” is not as expected

Musk’s political alliance with Trump was initially seen as key to Tesla’s late-2024 stock surge. Post-election, Tesla shares soared 66% in two months as markets bet on Trump’s energy policies (e.g., lifting EV subsidy caps) and protectionist measures (e.g., steel/aluminum tariffs) benefiting domestic automakers.

Meanwhile, the Trump administration’s cuts to federal employee benefits triggered nationwide protests at Tesla stores, including extreme acts like vehicle burnings. In Europe, multiple countries launched brand trust investigations over Musk’s political stances, causing sales in mature markets like Norway and Sweden to plummet by half.

Shifting institutional sentiment has further fueled concerns. In March 2025, UBS slashed Tesla’s annual delivery forecast from 1.88 million to 1.7 million vehicles. JPMorgan downgraded its price target to $120, citing an "unprecedented collapse in brand value," implying a potential 50% downside from current levels. Goldman Sachs pinpointed Tesla’s valuation shift from "tech growth stock" to "traditional automaker," arguing that its Robotaxi and humanoid robot ambitions are already overhyped. The projected 2025 delivery volume of 1.78 million vehicles (flat year-over-year) falls far short of the market’s prior 10% growth expectation.

A more pressing issue lies in the uncertainty surrounding future growth. Over the past decade, Tesla enjoyed a high valuation premium as both an "EV pioneer" and "autonomous driving leader." However, this narrative faces dual challenges in 2025: its Full Self-Driving (FSD) system is progressing slowly in China due to data localization constraints, and its collaboration with Baidu Maps has yet to yield breakthroughs.

The AI-driven concepts such as Robotaxi and humanoid robots have been deemed by analysts as "overvalued." Some argue that capital markets have realized Tesla remains fundamentally an automaker reliant on vehicle sales for profitability, and a stock price correction may be imminent. JPMorgan's $135 price target implies a valuation recalibration to counter excessive reliance on "future narratives."

However, the Model Y refresh faces production delays, while the anticipated $25,000 entry-level model remains unrealized. UBS estimates even a successful Model Q launch might yield sub-15% margins, insufficient to support growth expectations.

Tesla struggles with localization gaps and aging product lines. Its Chinese team is reportedly developing a budget Model Y using existing battery systems to cut costs—a strategy mirroring the stripped-down Model 3 launched in Mexico.

As global EV adoption accelerates, competition has shifted from market expansion to product refinement. JPMorgan Chase warned: "The automotive industry has never seen a brand lose so much value in 18 months." 

Musk's simultaneous leadership of SpaceX, Neuralink, and government advisory roles has raised investor concerns about divided focus. Musk himself acknowledged significant management difficulties, with these distractions impacting daily operations and amplifying market anxieties about Tesla's future.

In the short term, analysts and media outlets view Tesla as standing at a crossroads. "The company must navigate these challenges carefully to maintain its leadership in the electric vehicle market," noted one analyst. Some believe Tesla could reverse its fortunes through price cuts, enhanced product differentiation, or intensified marketing efforts. Long-term observers, however, maintain that Tesla "will remain a key player in the EV sector."