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Tesla stock (TSLA) has whipsawed this year amid a mix of factors. The company’s recent financial performance has been disappointing, to say the least. Its Q1 2025 deliveries fell well short of estimates, and so did its earnings for the quarter.
Along with the dismal financial performance and tepid deliveries, Tesla has been in the news for CEO Elon Musk’s political activities. While the billionaire was among President Donald Trump’s biggest backers and headed his Department of Government Efficiency (DOGE) until the end of May, he has since left the White House. While it seemed that Musk’s politics would take a backseat now and he would start focusing on his companies, the Tesla CEO has now emerged among the fiercest critics of Trump over his tax-and-spending bill.
Musk’s Feud with Trump
The relationship between Musk and Trump seems to have deteriorated significantly. Musk’s bitter breakup with Trump could have multiple implications. Bulls would want to believe that by disassociating from Trump, Musk might be able to placate those on the left of the political divide.
The flip side, however, could be that Musk alienates Trump supporters. Tesla is no longer a play on “Trump trade,” and if anything, the stock might be in the “penalty box” if Trump retaliates against the company. As for fundamentals, they are a lot less favorable now than they were before Trump’s election.
Tesla’s Growth Has Stalled
Tesla is currently battling one of the worst phases in its history, even as I agree with Musk that it's nowhere near the “many near-death experiences” that the company went through in the past. That said, those were different times, and Tesla was at best a marginal player in the automotive industry. The company has since reached scale, selling 1.8 million cars last year profitably. To Tesla and Musk’s credit, they proved naysayers wrong by ramping up efficiently. However, while no one really expects Tesla to go bankrupt, market expectations for the near-$1 trillion behemoth are much different now.
Cut to 2025, and Tesla is struggling for growth, and deliveries fell year-over-year in 2024 for the first time in history. The company’s deliveries declined 13% in Q1 2025, reaching the lowest level since Q2 2022.
The data for Q2 2025 deliveries, set for release early next month, is likely to show yet another yearly decline, given the tepid sales in China and Europe. Tesla was still hopeful for delivery growth in 2025 when it released its Q1 earnings in April, but we should see management take a more circumspect stance when it revisits its guide during the Q2 update.
Tesla’s once industry-leading margins have since fizzled away, thanks to the steep price cuts, and if not for the juicy regulatory credits it earns, the Elon Musk-run company would have posted a net loss in Q1. Given the ongoing EV price war, it would be foolhardy to expect Tesla to reach those fat margins anytime soon. Moreover, the company’s China business continues to face serious headwinds from domestic Chinese companies, and the sales from its China Gigafactory – which include both domestic sales and exports – have fallen year-over-year for eight consecutive months.
Tesla Bets on Autonomous Driving and Robotics
Musk has virtually withdrawn the 50% annual delivery growth compound annual growth rate guidance he once shared, and Tesla officially omitted its goal of reaching 20 million deliveries by 2030 in its last year’s impact report. The demand for electric cars, especially in the U.S., did not turn out to be as strong as many expected, and automakers are learning it the hard way, as they are now bogged down with excess production capacity.
With the core automotive business facing a severe slowdown and the energy business incapable of filling the void, Tesla (and analysts bullish on the company) have been instead fixated on other aspects of the business. These include autonomous driving and robotaxis in the short to medium term, and robotics over the long term. Long-time Tesla bull and Morgan Stanley analyst Adam Jonas argues that Tesla might even enter the electric vertical takeoff and landing (eVTOL) and drone space, capitalizing on its strength in manufacturing and autonomy. Meanwhile, apart from the robotaxi launch that Musk has confirmed is on track for a launch this month, I don’t see many other events that could help drive the stock in the near term.
Overall, while Tesla’s growth outlook hasn’t been this hazy in years, Musk’s bitter feud with Trump might end up making things even worse for the company.
