Since the Robotaxi event on October 11th, Tesla (NASDAQ:TSLA) stock is up 38%, currently priced at $291.60 per share This is a return to the early November 2024 price level. But following the stock market correction over the last month, TSLA shares are down 23%.
This was somewhat expected, given that the Trump-Musk alliance boosted TSLA stock in the short-term, which now fizzled out. The political exposure is also a double-edged sword, which ends up impacting Tesla EV sales.
Moreover, the very fact that political exposure is now included into investor calculations, as an unstable element, may dampen exposure to Tesla stock. Now that TSLA shares are relatively deflated, what can investors expect to see by the end of 2025?
Tesla’s Branding in Europe Wanes
By being politically outspoken, Elon Musk joined the friction between the Trump admin and the EU’s ruling class and their media apparatus. It appears this friction is already manifesting negatively for Tesla’s bottom line.
According to the European Automobile Manufacturers’ Association (ACEA (BIT:ACE)), Tesla sales in Europe plummeted last month, down from 18,161 in January 2024 to 9,945 EVs this January. Most notably, Germany and France had steepest drops, at 60% and 63% respectively.
This 45% drop happened despite EV sales growing 34% year over year. Any such drop is significant, but it is even more perilous for Tesla when accounting cheaper Chinese competition. This was just the window Chinese EU automakers need to gain market share. Consequently, even smaller Chinese SAIC Motors managed to substantially outsell Tesla, at 22,994 units.
How are Tesla’s Overall Sales?
As of January 2nd deliveries report, Tesla shipped 495,570 units in Q4 2024, totaling to 1,789,226 for full year 2024, which is down from 1,808,581 deliveries in 2023. For comparison, the largest Chinese automaker BYD (SZ:002594) delivered 1,764,992 million pure BEVs and 2,485,738 plug-in hybrids (PHEVs).
In January alone, BYD sold 300,538 NEVs, which is nearly 50% up from last year. For Q4, BYD outsold Tesla by ~13%. It also bears noticing that the hybrid category is gaining ground as the most affordable and practical solution. And Tesla has zero footing in this market. Getting squeezed by both Chinese hybrids and Japan’s Toyota (NYSE:TM) in this sector, pure EVs, and especially luxury EVs, are prioritized less by prospective shoppers.
Compounding the issue, Tesla’s Model Y is due for an update in March 2025, priced at around $61k, which is likely to pause demand. It remains to be seen if Musk’s political exposure will further cause disruption for this model’s (Juniper) adoption.
Tesla: Failure to Focus on the Core Business Model?
Obviously, the fact that Tesla’s market cap is worth more than five auto companies combined, which sold 17x more cars in 2024, tells us that investors view Tesla as a hybrid tech stock. This potentiality is mainly constrained to the expectation that Tesla will roll out robust full self-driving (FSD) capability.
That expectation is warranted because Tesla collected the most driving data of all car makers. By some estimates, 20x more real-time data than is uploaded to YouTube, the world’s largest video sharing platform. In turn, this vehicle data serves as Tesla’s competitive advantage to develop coupe de grace tech – robotaxi.
Not only would it be revolutionary from a technical standpoint, but it would transform Tesla’s business model from cyclical to consistent, utility-like revenue streams. However, other players are already present in this market. Namely, both Uber (NYSE:UBER) and Lyft (NASDAQ:LYFT) use Waymo driverless tech to forge a breakthrough in the autonomous ride-hailing market.
As of March 2024, Uber accounts for 76% of rideshare sales in the US, with the rest held by Lyft, according to Bloomberg Second Measure. To effectively counter that dominance, Tesla would not only have to deploy FSD but massively boost its bottom line – cheap EV production.
Only with under $30k robotaxis, produced at elevated scale, would Tesla have a shot at securing the ridesharing market and pushing Tesla’s valuation to $5 trillion, as Elon Musk hopes. Consequently, this means that Tesla should have been spending more R&D investments on becoming like BYD, in terms of streamlining operations, instead of meandering with Cybertruck as the company’s substantial misallocation of resources.
As it stands, it may very well be that Musk squandered Tesla’s US market share dominance, alongside the extension of that dominance, courtesy of escalated tariffs against Chinese automakers.
The Bottom Line
As noted previously, Tesla’s future relies on affordable model offering. This has been delayed for multiple years, not helped by the completely unnecessary Cybertruck. Tariffs can put a break on cheap Chinese EVs only as a temporary relief. After all, Chinese mastery of scaling is constantly increasing their foothold in the EV market.
When they reach economies of scale, boosted by design iteration and battery cost reduction, tariffs will become less and less effective. New Tesla “Model Q” in 2025 at around $30k aims to address that vulnerability, but it remains to be seen if it will cost more to produce.
On the other hand, if its cost production is indeed halved from Model 3, Elon Musk can still pull ahead. In the US, Tesla’s brand is strong, with many auto fans just waiting for Tesla’s departure from the premium business model. That departure should’ve happened years ago to pave the road for a scaled FSD rollout to counter Uber.
In the meantime, investors should view TSLA stock as a highly speculative investment. This is evident by the wide divergence between TSLA low and average price targets, at $135 and $379.13 respectively, per WSJ forecasting data.
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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.