Tesla Shares Plunge as European Sales Hit by Competition and Political Controversy

Despite a rise in overall electric vehicle sales in Europe, Tesla faces challenges with increased competition and controversies surrounding CEO Elon Musk.

Shares of electric car manufacturer Tesla experienced a steep decline of over 9% after the company reported that sales in the EU and UK had plummeted by almost 50% in January. This downturn marked a valuation drop below $1 trillion for the first time since November 2024. Compounding the challenges for Tesla, the company is facing fierce competition from Chinese manufacturers and others in the European market.

While overall electric vehicle sales in Europe surged by more than a third during the same period, Tesla’s sales figures showed a staggering 45% decrease across the EU, EFTA, and UK, with sales in the EU alone falling by more than 50%. Analysts attribute this decline primarily to rising competition, notably from the Chinese company BYD, which has gained market share by offering features as standard that are sold separately by rivals.

Furthermore, some analysts suggest that consumer sentiment may be influenced by Musk's controversial political actions. In the US, Musk has been criticized for his stance against federal development funding, while in the UK, his support for far-right figures has created a backlash. Additionally, his involvement with the far-right AfD party in Germany has further complicated Tesla's public image.

Historically, Tesla shares had received an uplift following the US elections due to Musk's ties with former President Trump, who has voiced skepticism about electric vehicles and suggested policies that could hinder their growth. Investors' optimism following those elections appears increasingly misplaced as market uncertainties, particularly around interest rates and potential trade tariffs, continue to provoke concern amongst investors and analysts alike.