Tesla Shares Fall 8% Amid Declining European Sales and BYD Competition

Tesla's stock fell by 8%, dropping its market cap below $1 trillion. Declining sales in Europe and growing competition from BYD challenge Tesla's market position. Read more about the latest developments.

Tesla's shares are going through a turbulent period, with their value dropping by 8%, pushing the company's market capitalization below the $1 trillion mark. Notably, such a scenario was previously predicted by Elon Musk himself, who compared a potential stock crash to "a soufflé under a sledgehammer" if the company failed to sustain profit growth.

The primary reason for the current plunge is the sharp decline in Tesla's sales in Europe. In January 2025, sales volume fell by nearly 50%, despite the overall electric vehicle market in the region growing by 34%. This stark contrast has raised concerns among investors, heightening fears that the company might lose its foothold in this key market.

Equally significant is Tesla's high stock valuation. Even after the recent drop, its price-to-earnings (P/E) ratio remains around 150. If profits continue to decline, this ratio could soar to 300 or higher, further fueling doubts about the justification of the current stock price.

Amid these challenges, Tesla is striving to strengthen its position through technological innovations. The recent launch of the Full Self-Driving (FSD) feature update in China is one such move. While this may allow the company to recognize some deferred revenue, initial user feedback has been mixed.

The situation is further complicated by growing competition. Chinese automaker BYD has already surpassed Tesla in quarterly electric vehicle sales: in the final quarter of 2024, it sold 526,400 vehicles compared to Tesla's 484,500. Although Tesla retained its annual leadership with 1.8 million cars sold, BYD came close with 1.76 million electric vehicles.

Analysts point out that Tesla's current stock decline may be a temporary setback if the company manages to stabilize sales and strengthen its presence in key markets. However, the future trajectory will largely depend on whether Tesla can maintain its leadership amid intensifying competition and persistent pressure from investors.

Source: electrek.co