Tesla shares fell sharply on Monday, dropping 5.96% to close at US$227.42, as investors braced for the electric vehicle maker’s first-quarter earnings and weighed the deepening fallout from CEO Elon Musk’s close ties to President Donald Trump.
The latest decline brings Tesla’s year-to-date losses to 44%, with the stock now trading near its lowest level since April 8. Monday marked the 12th session this year in which Tesla’s stock has fallen by more than 5%.
Political entanglements dominate investor concern
Much of the market’s focus is now on Musk’s growing political entanglements. Since taking a prominent role in the Trump administration’s Department of Government Efficiency (DOGE), Musk has drawn heavy criticism for diverting attention away from Tesla and fuelling backlash against the company’s brand.
Musk, who has reportedly contributed US$290 million to Trump’s re-election efforts, has become a central figure in the administration’s push to slash federal jobs and reduce the scale of government operations. Investors and analysts are now openly questioning whether this dual role is damaging Tesla’s reputation and long-term demand.
In Tesla’s online investor Q&A forum, hundreds of questions submitted ahead of Tuesday’s earnings call were not about cars or robots, but about Musk himself. One question, upvoted more than a thousand times, asked: “Did Tesla experience any meaningful changes in order inflow rate in Q1 relating to all of the rumors of ‘brand damage’?”
Others were more direct: “Is the Tesla board discussing whether their CEO should focus fully on Tesla and leave government to elected politicians?”
Brand damage and ‘code red’ moment
According to data from Caliber, only 27% of U.S. consumers surveyed in March would consider buying a Tesla—down from 46% in January 2022. Protests, vandalism, and boycotts have plagued Tesla facilities in the U.S. and Europe in recent months, all tied to Musk’s perceived alignment with Trump and controversial policies.
Wedbush analyst Dan Ives, a longtime Tesla bull, described the situation as a “code red” for the company. In a note to clients, he warned that Musk’s continued presence in government could result in “15% to 20% permanent demand destruction” for Tesla, adding: “Musk needs to leave the government, take a major step back on DOGE, and get back to being CEO of Tesla full-time.”
Earnings preview: Weak sales, high expectations
Tesla is scheduled to report earnings after the market closes Tuesday. Analysts expect the company to post earnings of 40–42 cents per share on revenue of around US$21.2bn, slightly down from the same period a year earlier.
The company already disclosed that it delivered 336,681 vehicles in Q1, a 13% decline year-on-year and its steepest drop in deliveries to date. Analysts will be closely watching gross margins, with many expecting a decline driven by lower production efficiency and falling volumes.
Barclays, which recently lowered its price target for Tesla from US$325 to US$275, described the current outlook as “a confusing set-up,” noting that any rebound will depend on Musk’s focus and Tesla’s strategy updates.
Notably, Tesla has said Tuesday’s results will be accompanied by a “live company update”—language that suggests more than just financials may be on offer. Speculation is swirling about updates on Tesla’s long-delayed Full Self-Driving (FSD) program or a formal unveiling of its robotaxi project, though no confirmation has been provided.
Tariffs add to external pressure
Tesla’s troubles aren’t limited to brand perception. Trump’s sweeping trade war has dealt a blow to the automaker’s China operations—its second-largest market, generating over US$20bn in 2024.
Trump’s new 145% tariff on Chinese imports has forced Tesla to stop taking orders for U.S.-built Model S and Model X vehicles in China. Analysts at Oppenheimer warned that “nationalistic trends” in China and intensifying competition from domestic players like BYD could shift sales away from Tesla and lead to “downward pressure on pricing” globally as exports are redirected.
Meanwhile, sourcing components for U.S. production has also grown more complicated. Parts for Tesla’s upcoming Cybercab and semi-electric cargo trucks are reportedly caught up in tariff-related cost hikes.
