Tesla’s Road Ahead – Is Musk Steering the Company Off-Road?

China: The Rise of BYD
In China, Tesla’s sales fell 11.5% in January, while its main competitor, BYD, saw a 48% increase. One major reason is technology and pricing – BYD now offers advanced AI-powered self-driving features at a fraction of Tesla’s Full Self-Driving (FSD) price, making it an attractive alternative for Chinese consumers.

Tesla has also faced regulatory hurdles in China, delaying the rollout of its self-driving technology. Meanwhile, BYD has surged ahead, capitalising on government support and strong local demand.

The U.S.: Cracks in Tesla’s Stronghold
Even in Tesla’s home market, trouble is brewing. Sales in California fell 12% in 2024, marking the fifth consecutive quarter of decline. This is a major red flag because California has historically been Tesla’s strongest market.

A key factor? Growing competition from legacy automakers like Ford, GM, and Rivian, which are launching compelling new EV models at competitive prices. Additionally, Musk’s political leanings have turned off many buyers in left-leaning states like California.

The Musk Problem: Is Tesla’s CEO Becoming a Liability?

Elon Musk’s visionary leadership has been central to Tesla’s rise, but in 2025, his political and personal controversies are becoming a major investor concern due to several reasons.

Declining Brand Favorability
Tesla’s net favorability rating has dropped to just 3%, its lowest ever, according to Stifel analysts. Surveys show that Musk’s outspoken political stance has directly contributed to declining consumer sentiment, particularly in Europe and parts of the U.S.

Political Ties Are Backfiring
Musk’s close relationship with the Trump administration was initially seen as a potential advantage, especially for regulatory easing on self-driving cars. However, it has also sparked backlash, particularly after the administration abruptly halted a USD 5 billion EV charging infrastructure plan, which could hurt Tesla’s long-term demand. European officials are also taking a harder stance on Tesla, possibly in response to Musk’s growing involvement in U.S. politics.

Investor Confidence Is Wavering
While Tesla’s stock is still up compared to a year ago, it has underperformed the broader market in 2025. Investors are increasingly uneasy about Musk’s divided focus - he’s balancing leadership roles across Tesla, SpaceX, Neuralink, and now his controversial government role within the Trump administration. Some analysts now view Musk as a risk factor rather than an asset, as Tesla’s market valuation remains extremely high compared to traditional automakers.

"Tesla’s biggest challenge in 2025 isn’t technology – it’s perception. Elon Musk’s political baggage is now weighing on sales, brand loyalty, and investor confidence."

Valuation: Tesla Is Now the Laggard Among the ‘Magnificent Seven’

Tesla has long been part of the Magnificent Seven, that has led market gains in recent years. However, in 2025, Tesla is now the worst performer in the group. Tesla’s shares are down 25% from their December high, making it the weakest stock in the Magnificent Seven this year. Other members, such as Microsoft, Apple, and Nvidia, have continued to rally, while Tesla has struggled with weak sales and Musk’s growing controversies.

Even after its recent drop, Tesla remains - by far - the most expensive stock in the Magnificent Seven in terms of valuation, trading at roughly four times the forward price-to-earnings (P/E) ratio of the rest of the group’s average. This has led to increasing concerns among investors that Tesla’s valuation is still too high, given the company’s slowing growth and execution risks. Wall Street remains divided: roughly half of analysts rate Tesla as a buy, while the other half suggest holding or selling, according to Bloomberg.

Can Tesla Make a U-Turn?

Despite the looming challenges, Tesla is not out of the race. The company has several key opportunities to regain momentum:

A New, Affordable Tesla Model
Tesla’s biggest problem right now is pricing. While competitors are launching cheaper EVs, Tesla has been slow to roll out a true mass-market model. That could change soon. Tesla plans to launch a sub-USD 30,000 EV by mid-2025, which could significantly boost demand in price-sensitive markets. If executed well, this could reignite Tesla’s growth and recapture lost market share.

Full Self-Driving (FSD) & Robotaxis
Musk has repeatedly claimed that Tesla’s FSD and robotaxi business will be the company’s most valuable segment in the future. While regulatory delays and consumer skepticism remain, Tesla plans to launch a commercial robotaxi service later this year.

Energy & Robotics Expansion
Beyond cars, Tesla’s energy business is booming. Its Powerwall and Megapack products are expected to grow by 50% in 2025, providing a stable revenue stream.

Tesla Is a High-Risk, High-Reward Stock

"Tesla remains a high-risk, high-reward stock. The next 6-12 months will determine whether it reclaims its dominance or falls further behind its fast-moving competitors."

For investors, the next 6-12 months will be crucial. Tesla’s Q2 earnings, FSD approval progress, and affordable EV launch will determine whether the stock rebounds—or continues to struggle.