By the close of U.S. stock markets on March 14, 2025, Tesla's share price had plummeted below the $250 mark, erasing over 50% of its value from its historic high in December 2024 and shrinking its market capitalization by nearly a trillion dollars. This significant shock in the capital markets is closely tied to Tesla's underwhelming sales performance in its key global markets: wholesale sales in China halved year-on-year to 30,688 units in February, sales in Germany plunged 76% year-on-year to 1,429 units in a single month, and the U.S. market experienced negative growth for four consecutive months.

From Europe to China, and from the U.S. to emerging markets, the trend of declining sales appears to be intensifying. Prominent institutions such as UBS, JPMorgan Chase, and Goldman Sachs have successively downgraded their delivery expectations and target share prices for Tesla. Goldman Sachs analysts, in particular, noted that Tesla faces "fierce competition in autonomous driving systems" within the Chinese market.

▍Tesla's "Besieged Fortress" Dilemma

Amidst the rapid growth of the global electric vehicle (EV) market, Tesla is confronted with unprecedented competition. On one hand, emerging EV brands pose a direct threat to its market share; on the other hand, the electrification transformation of traditional automakers further compresses Tesla's market space.

The recent "loss" of the Chinese market has emerged as a pivotal factor in Tesla's sales decline: its market share dropped from 7.8% to 5.4% in 2024, and wholesale sales in February 2025 halved year-on-year (-49.16%), marking a new low since August 2022. In stark contrast, BYD's sales surged 161% year-on-year over the same period. Data from the China Passenger Car Association reveals that as of February 2025, the retail penetration rate of new energy vehicles in China has reached 49.5%, with independent brands accounting for 71.3% of the market.

BYD, for instance, has successfully captured market share in the entry-level segment with certain plug-in hybrid models offering "same price for gasoline and electric versions." Simultaneously, new players like Li Auto and Xpeng have attracted a substantial number of consumers through differentiated product configurations and service experiences. As a result, Tesla's Model Y and Model 3 are gradually losing their pricing and technological advantages against these competitors.

In the European market, Tesla also faces severe challenges: in January 2025, Tesla's deliveries in Europe fell 45% year-on-year, with declines in core markets such as Germany and France exceeding 70%. The growing resentment towards the Tesla brand among European consumers is closely tied to Musk's political stance.

Another critical factor is the reduction of EV subsidies in numerous European countries. In 2025, France cut its EV subsidy budget from 1.5 billion euros to 1 billion euros, and Spain made similar policy adjustments. Some analysts believe that the reduction in EV subsidies directly increases the vehicle purchase cost for consumers, prompting price-sensitive customers to switch to cheaper alternative brands.

Furthermore, the electrification transformation of local European automakers is accelerating. Brands like Volkswagen, BMW, and Audi have introduced multiple high-performance, long-range EV models and reduced costs through localized production, further squeezing Tesla's market share.

▍"New Story" Falls Short of Expectations

The political alliance between Musk and Trump was once seen as the catalyst for Tesla's soaring share price towards the end of 2024. Following Trump's election, Tesla's share price surged 66% within two months as the market bet on his energy policies (such as lifting restrictions on EV subsidies) and trade protection measures (imposing tariffs on imported steel and aluminum) benefiting local automakers.

However, in reality, Trump's administration's policy of cutting federal employee benefits sparked protests at Tesla stores across the U.S., with extreme incidents like vehicle burnings occurring. Several European countries have initiated brand trust investigations due to Musk's political stance and actions, leading to a halving of sales in mature markets such as Norway and Sweden.

The shift in institutional sentiment has exacerbated the situation. In March 2025, UBS cut its full-year delivery expectations for Tesla from 1.88 million to 1.7 million units, while JPMorgan Chase downgraded its target price to $120, citing "an unprecedented drop in brand value" – implying a 50% downside potential from current share prices. Goldman Sachs' analysis pointed to the core issue: Tesla's valuation system is transitioning from "tech growth stock" to "traditional automaker," with its long-term narratives around Robotaxi and humanoid robots being overvalued, and its projected 2025 deliveries of 1.78 million units (flat year-on-year) falling significantly short of the market's previous expectations of 10% growth.

A more significant problem lies in the uncertainty surrounding future growth. Over the past decade, Tesla has enjoyed a high valuation premium as the "pioneer of electric vehicles + leader in autonomous driving," but this narrative faced double challenges in 2025. Progress on FSD (Full Self-Driving) in China has been sluggish due to restrictions such as data localization, and cooperation with Baidu Map navigation has yet to breakthrough.

Meanwhile, AI concepts like Robotaxi and humanoid robots are deemed "overvalued" by analysts. Some believe that the capital market is realizing that Tesla is still an automobile company reliant on car sales for profit, and a share price correction may be imminent – JPMorgan Chase's target price of $135 implies a valuation adjustment for over-reliance on "future stories."

As an automobile company reliant on car sales for profit, the lagging product line has become an issue that capital cannot ignore. According to foreign media reports, the refreshed Model Y, originally scheduled for delivery in March 2025, has seen slow initial deliveries due to capacity issues; the rumored "$25,000 economic model" has yet to materialize, with JPMorgan Chase directly stating that "it is still a low-end extension of the Model Y and cannot activate new markets." UBS calculations show that even if the Model Q is mass-produced as scheduled, its gross margin may be below 15%, making it difficult to support the growth narrative required by the share price.

According to media reports, the Tesla China team is secretly developing a "low-cost version of the Model Y," reusing the current battery and powertrain to reduce costs. This strategy mirrors the stripped-down Model 3 launched in Mexico in 2024. Rumors suggest that the launch timing of the new vehicle depends on the market performance of the refreshed Model Y.

As the global penetration rate of new energy vehicles continues to break through, market competition has shifted from capturing market shares to refining products. Tesla may no longer be able to compensate for the realities of insufficient localization and aging product lines. JPMorgan Chase warned in its report, "The automotive industry has never seen a brand lose so much value in 18 months."

Moreover, Musk's concurrent operation of multiple companies such as SpaceX and Neuralink, along with his government positions, has raised concerns among investors about his focus. Musk himself has acknowledged the significant challenges he faces in managing these companies, and this management distraction not only affects Tesla's daily operations but also exacerbates market concerns about its future development.

In the short term, Tesla stands at a crossroads in the eyes of many analysts and media outlets. "The company needs to meticulously address these challenges to maintain its leadership position in the electric vehicle market," said an analyst. Some analysts believe that Tesla may turn the situation around by reducing prices, enhancing product differentiation, or increasing marketing efforts. Foreign media also contends that in the long run, Tesla "will remain a key player in the electric vehicle sector."

Typesetting 丨 Yang Shuo
Image Source: Tesla