Tesla (TSLA) stock has hit a roadblock in the past three years, and investors are growing wary of CEO Elon Musk and his impact on Tesla’s brand. Earlier this month, the American electric vehicle (EV) giant reported 336,681 cars delivered in Q1 2025, representing a 13% year-over-year decline from Q1 2024. The figure missed analyst expectations of 370,000 vehicles and prompted a JPMorgan analyst to reiterate an Underweight rating on Tesla and express concerns over “unprecedented brand damage.”
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As a result, I am bearish on TSLA and believe its stock will continue to underperform due to EV declines and non-core growth challenges.
Tesla (TSLA) price history over the past 3 years
The Musk Effect: When a CEO Becomes the Brand
Following Elon Musk’s involvement in President Donald Trump’s campaign and administration, public perception of the enigmatic futurist has soured across the U.S. A recent poll showed that 36% of respondents have a “very unfavorable” opinion of him. Analysts agree that Musk’s political ventures are harming Tesla’s brand.
Protest march against Elon Musk and DOGE in Manhattan, NY, March 2025
Unlike Tesla, most consumers are unaware of who runs the company that manufactures their vehicle. Musk’s quirky persona and public visibility are a double-edged sword. People have been conditioned to think of Musk when they think of Tesla. Musk, in effect, is the Tesla brand, and now, many Americans wouldn’t dare purchase a Tesla because of Musk.
Rising Competition Erodes Tesla’s Market Position
Tesla’s problems did not begin (and will not end) with Elon Musk and his public image. Competition in the EV market is strengthening, with Tesla losing its leadership position in international markets like China. Aside from the political theatrics, the company’s bread-and-butter car production business is fading.
For instance, Chinese automaker BYD has now overtaken Tesla as the world’s largest seller of EVs, thanks to outperformance in China. Tesla is also losing ground in European markets. In the E.U., data revealed Tesla’s new vehicle registrations dropped 40% year-over-year in February. Much of this can be attributed to Tesla’s hesitance, or inability, to manufacture an entry-level EV. BYD’s Dolphin Honor EV “Free” trim, for example, costs just $15,700 and offers a range of 261 miles–an offering that Tesla struggles to match with its $30,000+ offerings with a similar range.
Performance Comparison between TSLA, LCID, F, GM and TM stocks
Performance Comparison between TSLA, LCID, F, GM and TM stocks
Perhaps most concerning is Tesla’s diminishing technological edge. While Tesla pioneered the modern EV, its competitors have caught up. For instance, Hyundai’s Ioniq 6 boosts an EPA-rated range of 361 miles and costs only $43,600. Tesla’s luxury appeal has diminished as well, and competitors like Mercedes, BMW, and Lucid (LCID) now match or exceed its premium offerings in range, charging speed, and interior quality.
Lastly, legacy automakers like Ford (F) and General Motors (GM) have aggressively expanded their EV lineups with models like the F-150 Lightning and Cadillac Lyriq. Both companies have loyal customers and extensive dealer networks. So, if any of their customers are tempted by an American EV, Tesla is no longer the leading option.
Premium Price and Slowing Growth Raise Valuation Concerns
Then there’s Tesla’s premium valuation. Tesla’s price-to-earnings (P/E) ratio is 117.5, implying sky-high growth expectations. Meanwhile, Tesla’s peers, like Toyota Motor (TM), trade at a P/E of 6.3. Moreover, Tesla’s high P/E is inconsistent with its growth. In 2024, revenues grew just 2% year-over-year.
Tesla (TSLA) revenue, earnings and profit margin history
To be fair, Tesla is not your average car company. Its autonomous driving technology, revenues from software services like “premium connectivity,” and diverse product offerings warrant a higher valuation than its strictly automotive peers. The question is, to what extent and for how long? In my view, any outperformance will be short-lived and brief.
Ambitious But Unproven Future Horizons
Tesla’s vision for the future appears from a sci-fi novel: completely autonomous cars and humanoid robots. In its Q4 2024 report, Musk estimated that Tesla’s humanoid robot, Optimus, could generate “over $10 trillion in revenue long-term.” Musk plans to build thousands of humanoid robots this year.
Remember that Musk is no stranger to lofty goals. In 2019, Musk was “very confident” that one million Tesla robotaxis would fill the streets by 2020. It’s safe to say that Tesla’s ambitions for Optimus should also be taken with a grain of salt. Tesla’s full self-driving (FSD) capability remains in beta testing with no clear timeline for regulatory approval.
Tesla’s energy storage business grew 67% despite these challenges in 2024. Its Megapack product line could eventually provide a meaningful revenue stream independent of vehicle sales. Still, Tesla’s energy storage business pales in comparison to its automotive segment.
On Monday, Wedbush analyst Daniel Ives decreased his price target on TSLA from $550 to $315 per share, citing concerns that tariffs may accelerate the trend of Chinese consumers choosing domestic EV companies like BYD. Notably, over 20% of Tesla’s revenues are from China.
Challenges Outweigh Opportunities
Tesla’s road ahead is challenging. Its EV market leadership showed signs of weakness even before its CEO decided to dive into political skullduggery. Musk’s political activities have undeniably caused brand damage, and the extent of the financial ramifications remains unclear.
In parallel, Tesla is dealing with intensifying competition at home and abroad, eroding technological advantage, and a premium valuation that is becoming harder to justify. Wall Street is clearly divided on Tesla’s prospects, and opportunities in robotics and autonomous driving remain distant. Until Tesla can address its brand perception issues and deliver meaningfully on one of its futuristic visions, I maintain a bearish outlook on the stock.
