Tesla’s $685B m-cap wipeout: What’s behind the historic slump?

Tesla, once the darling of the electric vehicle (EV) industry and Wall Street, is going through a historic slump. To put things into perspective, in less than two months, the company has lost nearly $655 billion, a figure that exceeds the entire market capitalization of companies like Boeing or Intel. On March 10 alone, Tesla erased $127 billion, which is more than the combined worth of BMW and Porsche.

Since Tesla's m-cap peaked at $1.4 trillion in December 2024, the company has nearly half of its market value wiped out. But the impact is not just on Tesla as a company. Elon Musk, the founder and face of Tesla, has personally lost $185 billion in wealth, his net worth plummeting from $486 billion to $301 billion, a financial hit larger than the GDP of Ukraine. 

This marks one of the biggest wealth drops in history, highlighting the severity of Tesla’s ongoing troubles.

Source: CompaniesMarketCap, Bloomberg Billionaires Index

To understand what went wrong, let’s break down the factors that have led to Tesla’s downfall.

Why is Tesla stock falling?

Tesla’s massive stock drop is driven by a combination of analyst downgrades, production challenges, political controversies, increased competition, and weakening brand appeal. Let’s dive deeper into each reason.

1. Analyst downgrade Tesla, lower delivery estimates

Several financial analysts have slashed their delivery forecasts for Tesla, shaking investor confidence. UBS Group AG analyst Joseph Spak cut Tesla’s Q1 2025 delivery forecast by 16%, now expecting only 3.67 lakh vehicles instead of his previous estimate. He also no longer expects Tesla’s annual sales to grow in 2025, instead predicting a 5% decline.

2. Declining Tesla sales

Source: China Passenger Car Association, JATO Dynamics, Bank of America

3. BYD overtaking Tesla

China's BYD (Build Your Dreams) has emerged as Tesla’s biggest competitor. The Shenzhen-based company has overtaken Tesla in EV sales, thanks to its more affordable models and localized software designed for Chinese drivers.

Source: China Automotive Technology and Research Center

Tesla’s diminishing presence in China is a huge red flag. China is the largest EV market in the world, and if Tesla continues to lose ground there, it will struggle to maintain global dominance.

4. Political controversies surrounding Elon Musk

Elon Musk’s increasing involvement in politics has damaged Tesla’s brand image. The billionaire pumped $270 million into Donald Trump’s 2024 election campaign and openly supported his policies. He was appointed to lead the Department of Government Efficiency (DOGE) in Trump’s administration, which aims to cut government spending and lay off thousands of federal employees.

Tesla showrooms in the U.S. are facing protests, with cars vandalized and bumper stickers reading, “I bought it before Elon went nuts.” Adding to his controversies, Musk has supported Germany’s far-right, pro-Russian, anti-Muslim party, called UK Prime Minister Rishi Sunak an “evil tyrant,” and dismissed Canada, a key Tesla market, as “not a real country.”

This political alignment has triggered public backlash, especially in Europe, where Musk’s association with Trump is viewed negatively. Tesla sales in Germany have fallen 76% in just one month, despite overall EV registrations rising, highlighting the growing consumer dissatisfaction with Musk’s leadership.

5. Trade War fears

Tesla Investors are also worried about potential trade wars under Trump’s presidency. Since Tesla relies heavily on Canada and Mexico for automotive supply chains, new tariffs could increase production costs, making Tesla vehicles even more expensive. This uncertainty has further pressured Tesla’s stock.

6. Delayed Tesla model updates, Labor strikes

While competitors are rolling out new models with innovative technology, Tesla has failed to refresh its lineup significantly. The Model Y and Model 3 have only seen price adjustments, not major redesigns, making them less attractive compared to rival offerings from BYD and other automakers.

BYD’s flagship model, the Song Plus, is priced between $21,000 - $26,000, while the Seagull model starts at just $9,900, both significantly cheaper than Tesla’s Model 3 and Tesla Model Y, which cost around $33,500.

Tesla is also facing labor strikes in Europe, particularly in Sweden, where workers have gone on strike over Tesla’s refusal to sign a collective labor agreement. This has impacted Tesla’s ability to deliver cars on time, adding to its troubles.

What’s next for Tesla?

Tesla’s market value has plunged, sales are down, competition is rising, and Musk’s political controversies are alienating buyers. If Tesla fails to address these challenges, it may worsen the sell-off. Investors and consumers alike will be watching closely to see how Tesla navigates one of its biggest crises yet.

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