NEW YORK, February 27, 2025 – Tesla stock has plummeted approximately 38% from its December peak, making it the worst performer among the “Magnificent 7” tech stocks this year as investors grow increasingly concerned about CEO Elon Musk’s political activities and the company’s fundamental challenges.
Stock in Freefall as Multiple Challenges Mount
Tesla shares breached the critical $325 support level in late February, triggering technical selling pressure as the stock completed a bearish head and shoulders pattern that had been forming since January. The electric vehicle manufacturer, which had enjoyed a spectacular 91% rally following Donald Trump’s re-election between November 5 and December 17, 2024, has now surrendered a significant portion of those gains.
“The technical breakdown below the 50-day moving average earlier this month signals deteriorating momentum,” noted technical analysts tracking the stock. “If the $325 support fails to hold, we could see further decline toward the $265 region, which aligns with the 200-day moving average.”
The current slump follows Tesla’s January report revealing its first year-over-year sales decline in more than a decade, a troubling development for a company whose premium valuation has long been justified by expectations of continuous growth. During the fourth-quarter earnings call, management notably downplayed volume growth expectations for 2025, merely mentioning a “return to growth” rather than providing specific targets, marking a significant shift from the third-quarter call when Musk had projected 20-30% volume growth.
Musk’s Political Role Divides Investor Base
Elon Musk’s unprecedented level of political engagement as head of the Department of Government Efficiency (DOGE) in the Trump administration has emerged as a contentious issue among Tesla investors. Critics argue that Musk’s political activities are diverting his attention from Tesla’s core business at a critical juncture when the company faces intensifying competition and operational challenges.
“Musk’s association with the Trump administration appears to be damaging Tesla’s brand perception among potential electric vehicle buyers, particularly in politically progressive markets that traditionally embraced electric vehicles early,” industry observers have noted.
The American Federation of Teachers (AFT), representing approximately $4 trillion in retirement assets through pension funds and other investment vehicles, has launched an activist campaign targeting Tesla’s major shareholders. AFT President Randi Weingarten has directly contacted the CEOs of six major asset management firms, including BlackRock, State Street, and Vanguard, urging them to reassess Tesla’s current market valuation.
“If Tesla’s stock were to fall to the $135 target projected by some analysts, it would represent a 1.5% loss in owners’ indexed portfolios in the S&P 500,” Weingarten stated in communications to institutional investors. “We’re concerned about protecting workers’ retirement funds from governance risks created by Musk’s divided attention.”
Chinese Competition Intensifies Pressure
Tesla’s challenges in China, the world’s largest electric vehicle market, have further complicated its growth narrative. The company has reported disappointing sales figures in this crucial region, raising questions about its competitive positioning against domestic Chinese manufacturers who enjoy strong government support and deep understanding of local consumer preferences.
BYD, Tesla’s primary Chinese competitor, recently unveiled advances in self-driving technology incorporated into models priced as low as $9,600, potentially undermining Tesla’s technological edge. This intensifying competition arrives as Tesla attempts to transition toward new growth avenues, particularly autonomous driving technology.
“Tesla now contends with numerous established automakers and emerging EV specialists targeting its market share,” said Barclays analyst Dan Levy, who has highlighted how Tesla’s fundamental outlook has deteriorated over recent months. “Unexpected mentions of battery supply constraints during the earnings call raised additional concerns about Tesla’s ability to increase production substantially in the near term, even if consumer demand recovers.”
Brand Erosion in Key Markets
The potential damage to Tesla’s brand image represents a particularly concerning development for investors. Reports suggest that potential electric vehicle purchasers are expressing increasingly negative sentiments toward Musk, which could translate into reduced sales, especially in markets where political considerations influence purchasing decisions.
“This brand erosion arrives at an inopportune moment, as Tesla faces growing competition from both traditional automakers and new electric vehicle specialists who can now offer consumers alternatives without the polarizing association with Musk’s political activities,” marketing experts have observed.
The impact appears most pronounced in European markets, where Tesla’s sales have reportedly “drastically declined” according to communications from the American Federation of Teachers to Tesla’s institutional investors. Europe has historically been a strong market for electric vehicles due to government incentives and environmental consciousness, making any sales deterioration in this region particularly significant for Tesla’s global growth narrative.
Robotaxi Launch Could Provide Lifeline
Despite Tesla’s current challenges, the planned introduction of Tesla’s robotaxi in Austin, Texas, scheduled for June 2025, represents a crucial potential catalyst that could reinvigorate investor enthusiasm. This unveiling marks a significant milestone in Tesla’s autonomous driving strategy and could reignite excitement about the company’s technological leadership and future revenue streams beyond traditional vehicle sales.
“The robotaxi launch could serve as a significant positive catalyst for Tesla’s stock,” noted Barclays analyst Dan Levy, though he also cautioned about the potential for a “sell the news” reaction following the actual event. The robotaxi initiative aligns with Tesla’s broader strategy to evolve from a pure electric vehicle manufacturer into a technology company with diverse revenue streams.
Investors Watch Technical Signals
From a technical perspective, analysts note that any sustainable recovery would initially need to reclaim the $325-330 support zone that was recently breached. A failure to promptly recover this level could accelerate selling pressure toward the $265 target identified by technical analysts.
“If Tesla shares can stabilize and rebuild momentum, they would face significant resistance near the $430 area, which marks the right shoulder of the head and shoulders pattern,” according to market technicians. “Breaking above this resistance would be technically significant and potentially open the path toward the previous peak near $489.”
Some Tesla investors, like Larry Goldberg (known as “Tesla Larry”), have publicly supported Musk’s political endeavors despite their potential short-term impact on Tesla’s stock price. “Addressing broader economic issues like the deficit is ultimately more important for long-term shareholder value,” Goldberg stated, echoing sentiments that Musk himself has endorsed.
The stock’s technical structure suggests that a complete bottoming process could take time to develop, particularly given the magnitude of the decline from the December peak. As the market continues to reassess Tesla’s growth prospects, competitive positioning, and the impact of Musk’s external activities, investors should prepare for continued volatility in the world’s most prominent electric vehicle manufacturer’s stock.
