During the week when Musk caused a stir in Washington, Tesla's stock price plummeted

This week, Tesla's stock price plummeted by 11%, marking the largest weekly decline since October of last year, and has dropped 25% from its historical high on December 17.

With a valuation approximately three times the average of the "Magnificent 7" tech giants, Tesla has become the worst-performing member of that index this year.

As CEO Elon Musk is busy pushing for reforms in the U.S. federal government, Tesla's sales for 2024 have declined by 1%, in stark contrast to the 20% growth in the global electric vehicle market. Sales in Germany have fallen to their lowest level since 2021, while deliveries in the Chinese market have decreased by 11.5% year-on-year, and even in its home state of California, sales have declined for five consecutive quarters.

Analysts believe that Musk's series of actions in Washington—ranging from freezing the International Development Agency to threatening to close the Department of Education—and his political statements in Europe are impacting Tesla's business performance.

Mike O'Rourke, Chief Market Strategist at Jonestrading, stated:

"There is an argument that Tesla is starting to be punished for Musk's close relationship with Trump."

Facing Challenges

After experiencing a remarkable doubling of its stock price over the past 12 months, Tesla has recently encountered a series of challenges.

Previously, Tesla delivered impressive results: the Model Y became the best-selling car in the world for the second consecutive year (including fuel vehicles), the company's energy business deployed enough battery storage to power 3,000 American households for a year, and its market capitalization briefly returned to $1 trillion, making it the seventh most valuable company in the S&P 500 index.

However, Tesla's electric vehicle sales are projected to decline by 1% in 2024, in stark contrast to the approximately 20% growth in the global electric vehicle market.

What is even more concerning for investors is that the latest sales data from around the world is equally bleak: in Germany, Tesla's sales in January fell to their lowest level since 2021, and sales in France and the UK also showed a decline. In one of Tesla's most important markets, China, deliveries decreased by 11.5% year-on-year.

In the U.S., Tesla's California market is also showing signs of fatigue: sales in the state fell by 8% year-on-year in the fourth quarter, marking the fifth consecutive quarter of decline, with an annual decrease of 12%, which is double the 6% decline in Tesla's overall U.S. sales. Although Tesla still holds about 50% of the electric vehicle market share in California, this trend is concerning.

The Cost of Political Stance?

Musk's recent series of actions in Washington has drawn attention. He has been involved in the so-called "government efficiency department" work, which includes freezing the U.S. International Development Agency, canceling contracts with the General Services Administration, and even threatening to close the Department of Education.

These political activities coincide with Tesla's declining sales, raising market concerns about whether Musk's political stance is affecting the company's business.

Media analysis suggests that Musk's political stance may be alienating the target customers Tesla most needs to attract—wealthy Democratic supporters concerned about climate change—while failing to gain new consumer groups

Transformation and Valuation

Tesla is transforming from a traditional automaker into a vertically integrated artificial intelligence application developer. During the earnings call on January 29, the company spent more time discussing autonomous driving, artificial intelligence, and robotics, rather than its traditional automotive business.

This transformation is also reflected in the company's valuation: Tesla's current price-to-earnings ratio is about 130 times the expected earnings for 2025, nearly double the recent historical level, indicating that the market has high hopes for its autonomous driving technology.

2025 will be a critical year for Tesla. The company plans to launch an autonomous taxi service while releasing a new low-cost electric vehicle model (referred to in the industry as Model 2).

Douglas Busch, founder of ChartSmarter, analyzed that if Elon Musk can achieve breakthroughs in both areas, Tesla's stock price is expected to reach new highs; conversely, the stock price may fall back to around $350