The writing may not yet be on the wall for Tesla or its founder Elon Musk, but it is certainly on the back bumper.
American owners of Tesla vehicles can now buy stickers with anti-Musk messages such as: ‘I bought this before I knew Elon was crazy.’
Disaffection among the eco-conscious buyers of his electric vehicles (EVs) in the US and Europe is not the only problem confronting Musk, the first buddy to President Trump.
Hazard lights are flashing and investors should be on the alert. Sales are slumping, fears are growing about competition from cheaper Chinese alternatives and there is speculation about its complex financing.
And that is without even mentioning the biggest worry of all: Musk himself and his relationship with Trump.
The tech tycoon juggles running Tesla with incessant posting on his social media platform X, trying to slash US government expenditure and fathering numerous children.
His involvement in politics is controversial and potentially damaging to Tesla’s commercial interests.
Elon Musk juggles running Tesla with incessant posting on his social media platform X, trying to slash US government expenditure and fathering numerous children. Pictured in the Oval Office with President Donald Trump last month
American owners of Tesla vehicles can now buy stickers with anti-Musk messages such as: ‘I bought this before I knew Elon was crazy.’
‘Tesla Takedown’ demonstrations have been taking place outside dealerships in the US and Europe. There is even talk of boycotts.
A survey conducted by EV review website Electrifying.com, found that 59 per cent of British owners and potential buyers of EVs said they would steer clear of a Tesla because of Musk.
The Royal Society, Britain’s premier scientific body, this week faced calls to expel him as a member, underlining the debate over his political role.
It’s little wonder Jacob Falkencrone, of Saxo Bank, argues that Musk’s political influence, ‘once an undeniable asset, may now be doing more harm than good’.
Such worries are only likely to increase if the relationship between Trump’s America and Europe becomes even more strained, and if the internal culture wars intensify in the US.
In the past, investors have enjoyed the benefits that flowed from Tesla’s first-mover advantage in the EV sector. The share price is still 2,000 per cent higher than a decade ago.
But now they are going to be paying much more attention to what David Coombs of Rathbones regards as crucial issues: ‘Musk’s stewardship of the company and his commitment to using capital wisely, rather than on risky ventures.’
As boss of DOGE (Department of Government Efficiency) Musk may have put himself on a collision course with some of the fan base of his cars, many of whom are environmentally conscious and vote Democrat.
Alienating large numbers of customers is not a good place to be.
This is especially so against the background of a global trade war sparked by Trump’s latest round of tariffs.
Musk also faces ferocious competition from Chinese and other low-cost EV manufacturers.
Tesla shares slide 30% this year
The once irrepressible shares have been sinking ‘faster than a Tesla Cybertruck in quicksand’, as one commentator put it.
They fell by 14 per cent over the past week and are down 30 per cent since the start of the year.
At the current share price of $284, against $480 in December, Tesla’s market value stands at $916bn – below the illustrious $1 trillion level.
As a consequence, Musk, a 53-year-old father of 14, is only just holding on to his laurels as the world’s richest man, with a fortune of $343bn. He has lost $100bn on paper due to the share price slide.
The bulk of his wealth is based on Tesla stock (he has a 12.8 per cent stake in the company) despite his extensive business empire which includes rocket company SpaceX.
The futuristic-looking Cybertruck – a full-size electric pick-up with a stainless steel body – looks indestructible and is designed to withstand a 9mm handgun round. It is not, however, fully bullet-proof.
Nor is Musk’s standing and that of his company.
Just last month he enjoyed what was in effect a big vote of confidence by US banks. They sold on $12.5bn of loans he had taken out to help finance his takeover of Twitter (now X).
In deals of this sort, loans are often sold at a sizeable discount to their face value. Musk’s loans, though were sold at a tiny discount of 97 cents to the dollar, signalling that he is believed to be highly creditworthy. The eager purchasers were a consortium of other banks.
Even so, events are moving fast. Questions are mounting over Tesla’s strategy and its debts, as sales fall in the US and in Europe.
Musk, a 53-year-old father of 14, is only just holding on to his laurels as the world’s richest man, with a fortune of $343bn
What’s happening to Tesla sales?
January sales in France and Germany were 63 per cent and 60 per cent lower year-on-year respectively. There was a 7.8 per cent drop in the UK. Scandinavians are also falling out love with Tesla’s various models.
Tesla makes 51 per cent of its cars in China. Sales of these vehicles slumped by 49 per cent in February.
At the same time, Chinese group BYD increased its sales by 161 per cent during the month. BYD (standing for Build Your Dream) has already toppled Telsa from its position as the world’s number one in EVs.
Trump’s tariffs could supress sales further, and could also raise the bill for components and materials such as steel. Tesla’s chief financial officer Vaibhav Taneja says that, although the company has tried to build local supply chains in each of its markets, tariffs will still have an impact.
Ironically, Tesla is likely to be hit by the ending of green subsidies on EVs brought in by the Biden administration.
And customers who do not find Musk a turn-off may be discontented for other reasons. These include a perception in some quarters that Tesla is no longer a cutting-edge car marque.
BYD will be offering customers a self-driving facility system as standard on even its cheapest models. At Telsa, there is a $99 a month charge for the technology.
Such has been the extent of the decline in the shares that giant US investors such as BlackRock and Fidelity are mulling whether to continue to back Musk – or back away.
UK investors in Tesla may have been reckoning that Musk’s closeness to Trump would provide support to the shares. But the road ahead is looking a good deal more hazardous.
A Tesla showroom is torched in an arson attack in France, amid growing fury in Europe over Elon Musk’s politics
Are Tesla’s debts a problem?
For the moment, Tesla does not look over-indebted, but this perception could shift.
Particularly if there are more concerns over Musk spending all his waking hours in the White House, rather than at the Tesla gigafactory in Austin, Texas.
Tesla’s total liabilities, which include its $8.2bn of debt, stood at $48.4bn at the end of 2024. The company’s assets, such as cash and investment, totalled $58.4bn.
The powerful rating agencies take different views on the company’s creditworthiness. S&P rates Tesla as ‘BBB’. This means that its debts are ‘investment-grade’.
In other words, it is considered not to be a particularly high risk for loans, though it is ‘more subject to adverse economic conditions’ than corporations with higher ratings.
S&P expects Tesla’s profit margins to ‘remain strong’. But the agency also forecasts rising competition and pressure on vehicle prices.
It points out Tesla has a ‘very high’ key-person risk due to Musk’s dominance of the business.
Rival agency Moody’s rates the company at Baa3, its lowest investment-grade classification. This suggests that periods of volatility could lie ahead.
Musk’s all-powerful role at all his companies should be a source of anxiety to Tesla investors. Shareholders would be vulnerable if the mercurial tycoon decided to run up major borrowings against his stakes in Tesla, SpaceX and the rest to finance other ventures.
There is also set to be more scrutiny over Tesla’s use of ‘securitisation’ of car leases as a way to raise funds. This complicated and opaque technique – of bundling up loans or liabilities and selling them on – was one of the triggers for the financial crisis.
Among the analysts who follow the Tesla stock 29 rate it as a ‘hold’ or ‘sell’, meaning only those with deep pockets and a taste for risk should contemplate buying now
Will Tesla shares fall further?
Dan Levy, of Barclays, argues that Tesla shares are fundamentally disconnected from reality.
He believes the share price is factoring in possible gains from robo-taxis and the like – even though, for now, cars account for 90 per cent of its sales and 85 per cent of its profits. Therefore, his view is they are riding for a fall.
Analysts at JP Morgan believe the shares could slide to $135 from the current $284.
However, Tesla enthusiasts, such as the influential Dan Ives, of Wedbush Securities, contend that the price could soar to $400, thanks to Musk’s plans for self-driving cars powered by artificial intelligence (AI) and its Optimus humanoid robots.
Some analysts envisage a price of $475.
Among the sceptics, there is a particular focus on Tesla’s price/earnings ratio. This is a gauge of how highly investors value a company’s growth prospects.
A high ratio can spell danger as it can indicate that investors’ expectations for growth are unrealistic, so the shares are over-valued and likely to fall. On this score, the car alarm is going off loudly at Tesla.
Its price earnings ratio is a heady 140 – which means at the current rate, it would take 140 years to recoup an investment at the current rate of earnings.
That compares with Ford’s ratio of 6.5 and Mercedez-Benz at 5.7. Its closest competitor for electric vehicles, China’s BYD, is only at a 31. These figures indicate that Tesla’s share price is at risk of a dangerous skid.
Perhaps it is no surprise that among the analysts who follow the stock, 29 rate it as a ‘hold’ or ‘sell’. But 25 continue to consider it a ‘buy’.
Only those with deep pockets and a taste for risk should contemplate buying now. It’s noteworthy that Scottish Mortgage, the £12.56bn technology investment trust, once a fierce proponent of Tesla, has now trimmed its holding to below 1 per cent of its assets.
What rival shares could you buy?
There has been a slowdown in the global transition to EVs but there are some options if you are convinced that the long-term shift is away from petrol cars.
Shares in the Chinese EV group BYD are up by a third over the past three months to HK$339. Nevertheless all but one of the 33 analysts covering stock rate it a ‘buy’ -with 14 giving it a ‘strong buy’ accolade.
If you are looking for a flutter on a US business, Rivian, a manufacturer of pick-up trucks and vans, is one option. However, its shares have tumbled by 16 per cent this year as anxiety has grown over the ending of green subsidies and weaker EV sales – so it’s strictly for those with strong nerves.
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