Once a "Tesla believer": Why I think Tesla will drop over 50% this year?

In the electric vehicle industry, Tesla was once seen as a synonym for innovation and disruption, and Musk was almost completely trusted.

However, for former Tesla loyal supporter Ross Gerber, that faith no longer exists.

As an early investor, Gerber, the president and CEO of Gerber Kawasaki Wealth & Investment Management, holds deep concerns about Tesla's future and has expressed a pessimistic outlook on the company's prospects in multiple public forums. He reduced the company's Tesla shares by 31% in 2024, and by the end of last year, he held 262,000 shares of Tesla stock, worth $106 million.

In 2025, he predicts that Tesla's stock price could drop by more than 50%. After experiencing nearly an 11% decline from the beginning of 2025 to now, Tesla seems to be entering the predicament that Gerber anticipated.

On the 22nd, Gerber elaborated on his bearish outlook on Tesla in an interview with Business Insider, detailing four core reasons. These include obstacles to fully autonomous driving technology, Musk's distraction, slowing sales growth, and the risk of overvaluation.

1. Obstacles to Autonomous Driving Technology: The Absence of LIDAR is a Hard Injury

Gerber believes that Musk's plan to launch a fully autonomous taxi network in Austin this June is overly ambitious and nearly impossible to achieve. He pointed out that Tesla's autonomous driving system relies on cameras rather than LIDAR sensors, which is in stark contrast to the technological route of competitors like Waymo, a subsidiary of Alphabet. Gerber stated, "We are clearly lagging behind in the autonomous taxi and autonomous driving fields," and believes that Waymo's solution is "safer."

He even stated:

"I now believe that to have a sufficiently safe fully autonomous driving system, LIDAR must be used. Unless they change the hardware, they (Tesla) will encounter bottlenecks."

2. Musk's Distraction: Shift of Focus to AI, Tesla is Neglected

Musk, who is the CEO of multiple companies including Tesla, SpaceX, and xAI, has a packed schedule. Gerber believes this is a problem for Tesla shareholders, especially considering that Musk seems to have devoted all his energy to the AI field in recent months. He stated:

"He (Musk) is putting 100% of his energy into AI, which actually harms Tesla more than it benefits xAI and other businesses because he is no longer working at Tesla."

Gerber emphasized that if Musk could devote all his time to the research and development of fully autonomous driving technology, he would have more confidence in Tesla

3. Slowing Sales Growth: Intensified Competition and Damaged Brand Image

Despite investors' high expectations for Tesla's autonomous driving and robotics projects, car sales remain its core business, and this business is facing the dilemma of slowing growth. In 2024, Tesla's electric vehicle sales are expected to see an annual decline for the first time.

Gerber believes that competition from other electric vehicle brands poses a substantial threat to Tesla in markets outside the United States.

Moreover, Musk's close relationship with Trump has also negatively impacted the Tesla brand. Gerber explains:

“This has sparked anger among people. I have never seen people so angry at Tesla, but this is not directed at the company itself; it is because of Musk, and this is the only way people can vent their frustrations.”

According to previous data from the German Association of the Automotive Industry (VDA), Tesla's new car registrations in Germany in January fell by 60% year-on-year. Other data shows that the company's car sales in France and Norway plummeted by 63% and 38%, respectively.

4. Overvaluation: Premium Difficult to Sustain

For a long time, Tesla's valuation has been higher than that of other automakers and large tech companies. However, if Tesla's car sales continue to decline, its premium may shrink significantly.

According to YCharts, Tesla's market capitalization is as high as $1.1 trillion, nearly five times that of Toyota, but its profit last year was only 20% of Toyota's. Its forward price-to-earnings ratio of 118 times is more than three times that of Nvidia, the second most expensive stock in the "Mag 7," and also higher than its five-year average of 84 times.

Gerber states:

“For me, the issue is that I hold $100 million worth of Tesla stock with a price-to-earnings ratio of 125 times, which is far from any normal Mag 7 stock's price-to-earnings ratio. Therefore, Tesla's vulnerability lies in the fact that if this year does not go well, its stock price could drop by 50%.”

Some major Wall Street institutions also seem to agree with Gerber's viewpoint. JP Morgan holds a pessimistic outlook on Tesla's recent financial report. Although investors initially showed enthusiasm, the bank still maintains a target stock price of $135 for Tesla, indicating a potential downside of 60% from current levels