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Tesla (NASDAQ:TSLA) Stocks have performed pretty badly recently. Electric Vehicle (EV) stocks fell 44% today to $267.28, as they peaked at $479.86 in mid-December.
If investors had put £5,000 at that point, they only have £2,785 today. Disappointment!
Will investing that £5,000 today be a great opportunity, or will the stocks continue to collapse?
Bubble burst?
Tesla stocks have been a winner in the stock market for a long time. Since its release in 2010, it has skyrocketed by 20,781%. However, the assessment has always been concerned. The company’s 131 price return ratio (P/E) ratio is certainly expensive.
I don’t think the valuation is the only reason why its stocks are declining, as companies always have doubled valuations.
The rating is always justified by strong growth and is now beginning to dissipate. In fact, sales are declining. Looking at the company’s latest press release from Tuesday (April 2), it delivers 336,681 vehicles in the first quarter of 2025, down 13% from 386,610 vehicle delivery in the same period last year.
So, what causes Tesla’s growth to stagnate?
First of all, competition is hurting the company. For example, EV sales from competitors in China byd It rose 39% in the first quarter of 2025 to 416,388, in stark contrast to Tesla’s decline.
Second, Elon Musk’s involvement in politics may have undermined the image of the carmaker. This is evident in the protests of Tesla cars and dealers. Furthermore, masks’ criticism of European politics has been unjustly accepted on the continent. The company’s most popular model, Model Y, saw sales decline year by year in March. In France, other countries have fallen by 37%, and even more.
Trump’s tariffs
So can Tesla overcome these problems and resume growth? Certainly, the company has plenty of catalysts for future growth. This is an example of involvement in self-driving cars. The market is expected to grow at a combined annual rate from 37% to 2034. This is an opportunity for Tesla to seize.
But Trump’s tariffs could spell out more trouble for the company.
It is considered to be suitable for customs duties, but it sources a portion of that portion for production outside the US. Therefore, the company may still face additional costs. If you pass these to consumers, you could suffer a decline in demand. When the company absorbs them, it digs into margins and profitability. Automakers have already lost their total margin since 2022, which is no use for automakers. At the time it was 25.6%, but now it is 17.9%.
Additionally, the company could be hit even further with its overseas sales due to its potential reverse tariffs. For example, the EU is considering adopting this measure, adding to the struggles of selling at Tesla’s bloc.
For me, Tesla stock is already quite expensive. Even if it is reduced by half, its P/E is still 60. This is too expensive, especially for the problems companies are encountering. The World Trade War is only added to this. So we could see £5,000 investments fell by half over the next 12 months and £2,500 (and potentially low).
