Tesla Falls Below $1 Trillion Market Cap

On Tuesday, 25 February, Tesla (TSLA) shares fell over 9% in another day of heavy losses that took the market cap of the EV-maker back under $1 trillion for the first time since November. (Source: BBC)

It extends the run of poor performance for Elon Musk’s company in 2025, with the stock now sitting at $302.80, down 25.02% year-to-date, but still up 49.87% over 12 months.

Tesla Stock Performance Chart

The chart for trading Tesla shows a high volatility downtrend in 2025, marked by several days of sharp losses matched by above-average volume. When volume is high on down-days it acts to confirm the strength of the downtrend because sellers are being more active than buyers. Likewise, high volume in up-days in an uptrend generally serves to confirm buyers are in control of the market.

*Past performance does not indicate future results

What May Have Caused the Latest Decline in TSLA Stock?

European Sales

Tuesday’s decline came after it was reported that EU and UK vehicle sales fell by 50% and 45% respectively in January. This compounds the bad news that annual sales declined for the first time ever in 2024. Investors are naturally nervous to see the weakening financial performance of the EV-maker, especially with a lofty P/E ratio of over 148.5.

Politics

There was some hope after the US elections that Musk’s closeness to President Donald Trump would be good for Tesla but those hopes appear to have quickly dissipated as Trump  took office. One route to Tesla benefitting under Trump is believed to be the policies that help speed up the adoption of self-driving vehicles, supporting Tesla’s new Robo Taxi service. So far, Trump has been an outspoken advocate for the oil and gas industry and has played down the need for more electric vehicles in America.

In Europe, it's conceivable that Musk’s new political ties to right-leaning parties in both the UK and in European countries like Germany have put off some buyers. Musk recently showed his support for the right-leaning anti-immigration party AfD in German elections.

Car Model Lineup

An additional reason behind Tesla’s sales decline may be that consumers have been holding off on purchases in anticipation of the updated Y model, set for release in the first half of 2025. Specifically in January Tesla’s sales faced stiff year-over-year comparisons, as the monthly figures from the previous year were buoyed by a refresh of the Model 3.

Competition

While Tesla’s stock price has been in the doldrums, BYD (1211.HK) stock has broken out to record highs, bolstered by plans to add autonomous driving technology to its entire lineup, including EVs priced as low as $10,000.

Comparing the EV sales of the two largest EV car companies, Tesla delivered a record 495,570 electric vehicles (EVs) in Q4, but this was still below estimates and relied more heavily on lower-margin China sales while Cybertruck deliveries slowed. 

Over the full year, Tesla’s 1,789,226 EV deliveries marked a slight 1% drop from 2023. Meanwhile, BYD sold 1,524,270 vehicles in Q4 and ended 2024 with 4,272,145 total sales, a 41% annual jump, split between pure battery electric vehicles (1,764,992 BEVs) and an expanding lineup of plug-in hybrids. (Source: Investor's Business Daily)

Conclusion

Tesla’s recent stock decline below the $1 trillion market cap reflects weaker European sales, ongoing political risks, and intensifying competition from rivals like BYD. Nonetheless, the company’s strong brand and upcoming Model Y update could help revive demand, particularly as Tesla maintains robust energy storage deployments.

Only time will tell what lies ahead.

*Past performance does not indicate future results