Are Tesla’s glory days over?

Not long ago, the media seemed to be in tune, running
stories about how Elon Musk’s Tesla was one of the biggest beneficiaries of
Donald Trump’s victory in the U.S. presidential election.

Initially, this sentiment appeared to be true: Tesla stock rose a
staggering 90% between November 5 and mid-December, despite the lack of
compelling fundamental reasons behind this rally.

Investors apparently believed the company’s future was
secure with a powerful ally in the White House. Regulatory scrutiny? A thing of
the past, with the hope that Tesla’s trajectory would be upward from then on.

However, the optimism was short-lived. Since December 17,
Tesla shares have plunged nearly 37%, and there is little sign of a turnaround
in the trend. Ironically, investors have Elon Musk
himself to thank for this plunge.

His decision to dive headlong into U.S. politics, becoming
not only a highly visible figure, has alienated a portion of the public, both
in the U.S. and abroad. For some, Musk and his products have become
toxic.

The impact is already evident. In January, Tesla vehicle
sales in Europe plummeted by a staggering 45%. The company only sold 9,945 cars
in the region, down from 18,161 in the same month of 2024.

Another growing concern among investors is Musk’s involvement with
the Department of Government Efficiency, which
is seen as a potential distraction, pulling his attention away from Tesla.

To make matters worse, Tesla’s challenges go beyond public
relations. Geopolitical tensions between the U.S. and Europe could escalate
further, posing an additional threat to the company.

A key factor in this equation is the so-called EU
Anti-Coercion Instrument, a regulation passed at the end of 2023. This law
allows the EU to retaliate against third countries – such as the United States
– that attempt to exert pressure on European policy through trade restrictions.

In this framework, the EU can impose countermeasures on
companies and individuals accused of instigating such actions. If the U.S.
increases tariffs on European products, Tesla could be in the crosshairs.

Even if geopolitical tensions do not escalate further,
Tesla faces fierce competition. The company is losing market share to competitive
Chinese EV manufacturers and traditional
automakers.

Once considered an industry pioneer with little
competition, Tesla is now facing well-established automotive giants that have
caught up in both technology and production scale.

What does the continued decline in Tesla’s stock mean for
Tesla

If the downward trend persists, the company’s financial
problems could send shockwaves through the broader stock market. In a
worst-case scenario, this could turn into what Nassim Taleb would call a true
“black swan” event: unexpected, disruptive, and with profound consequences.

This article was written by FL Contributors at www.forexlive.com.