Tesla’s stock took a hit on Monday due to uncertainty surrounding President Donald Trump’s tariff policies. The electric vehicle maker also continues to face brand erosion tied to CEO Elon Musk. If tariffs increase, the cost of materials and production could rise, affecting Tesla’s pricing and profitability. Analysts worry that escalating trade tensions could spark a trade war, further complicating Tesla’s supply chain and overall market stability.
Ben Kallo, an analyst at Baird, highlighted the growing concern over Tesla’s market position, telling CNBC’s Squawk on the Street that such economic uncertainty could impact consumer demand. Higher production costs, combined with potential retaliation from trading partners, could make Tesla’s vehicles less competitive.
At the same time, Tesla is grappling with a decline in sales, particularly in Europe. According to a Bank of America report, Tesla’s new vehicle sales in the region fell by approximately 50% in January compared to the previous year. The report suggested that some of this decline stemmed from a shifting perception of the brand, with consumers growing increasingly hesitant to support Tesla due to Musk’s public statements and political affiliations. Additionally, some customers are waiting for Tesla’s refreshed Model Y before making a purchase, further delaying sales.
Despite Tesla’s challenges, the Model Y remained the world’s best-selling electric vehicle in January. However, it now faces competition from China’s Geely Geome, which outsold the Tesla Model 3 sedan for the month. While the global electric vehicle market grew by 21% year over year in January, Tesla did not benefit from this growth, as its sales declined.
Musk’s political actions and their impact on Tesla
Beyond economic factors, Tesla is dealing with brand erosion linked to Musk’s controversial political rhetoric. Musk, the world’s richest person, has become a central figure in Trump’s administration, where he leads the so-called Department of Government Efficiency. His role in the administration, which aims to significantly reduce the federal government’s workforce and spending, has sparked criticism from both political activists and former Tesla supporters.
Adding to the controversy, Musk has used his social media platform, X, to attack judges who have ruled against his interests. He has also promoted false Kremlin narratives about Ukrainian President Volodymyr Zelenskyy, further alienating certain consumer demographics.
These factors have contributed to protests against Tesla across the United States. Activists and former Musk fans have demonstrated outside Tesla facilities, expressing their discontent with the CEO’s actions. Meanwhile, Tesla locations have increasingly been the targets of vandalism and arson attempts. Law enforcement officials in Loveland, Colorado, confirmed multiple incidents of vandalism and arson at a Tesla store and service center, with the most recent occurring on March 7.
Kallo noted that such incidents could significantly impact Tesla’s consumer base, even among those who previously supported Musk. “When people’s cars are in jeopardy of being keyed or set on fire, even people who support Musk or are indifferent might think twice about buying a Tesla,” he said.
As Tesla navigates these challenges, the company must find a way to reassure both investors and consumers. With political tensions, economic uncertainty, and brand controversies weighing on Tesla’s performance, the company’s ability to maintain its market leadership in the EV industry remains uncertain.
