Down 30% YTD, Tesla Faces Challenges as Stock Added to ‘Best Ideas List’

Tesla's stock (NASDAQ: TSLA) has started 2025 with downwards pressure overwhelming market bulls, as the 30.75% decline in price can attest. This morning's pre-market shows no signs of a reversal early in the session, with the stock down a further 2.74% at $255.48.

The company, one of the preeminent electric vehicle manufacturers, is grappling with a notable decline in sales across key markets, particularly Europe. The company has reported a significant drop in its sales figures for January and February, marked by a 45% decrease in January and a further 76% decrease in February in Germany, which is one of its major markets.

In contrast to Tesla's performance, the overall electric vehicle registrations in Germany have shown a robust increase of 31%. This discrepancy highlights a concerning trend for Tesla, as it struggles to maintain its market share amidst growing competition in the electric vehicle sector.

Further compounding Tesla's difficulties in Europe is the suspension of production activities at its Grünheide plant. These disruptions are attributed to necessary reworking of the assembly lines, presenting additional operational challenges for the company.

Moving over into the Chinese market and the trend is broadly similar, with drops in shipments in each of the past five months. Tesla's market share in China is now well under 5%, with shipments down almost 50% in February YoY, while BYD's share of the market has grown towards 15%.

Despite these operational challenges, some analysts, including those at Wedbush are remaining firmly staunch in their support of the stock. The firm added Tesla to its “Best Ideas List”, whilst continuing to rate the stock as Outperform, setting a $550 price target.

Wedbush states “the time has come” and believes “this is a gut check moment for the Tesla bulls after this massive selloff in Tesla shares with fears mounting.” In other words, recent selling pressures might be giving way to renewed strength.

Additionally, the firm projects that advancements in autonomous technology and the Optimus project could account for 90% of Tesla's future value, potentially pushing its overall valuation past $2 trillion.

These market challenges for Tesla are set against a backdrop of broader industry growth, with global electric vehicle sales rising by 7.3%. However, Tesla's performance in other markets, such as the United States, also showed a decline—down 1% in 2024, marking its first annual sales decline in over a decade.

With Wedbush seeing “the biggest innovation and technology cycle in Tesla's history ahead over the next few years.”, and expecting the launch of a lower-cost model (priced under $35,000) before summer, to boost global consumer demand and get Tesla “back on the growth track.”, there are various complexities that will play out in the months ahead.

If Tesla can bring themselves anywhere close to Wedbush's outlook, the future remains bright, but there will likely be obstacles in any path forward as the current EV market continues to look challenging. We have certainly seen the greed phase quite a few times when it comes to TSLA, now we wonder whether this is the ‘fear' that should be bought, or the start of a more prolonged drawdown.

In the past we have seen Tesla's stock price fall more than 70% from highs of late 2021, into 2023, so this pattern is not without precedent. Those with a crystal ball will do well in such an environment, others may be better on the side-lines until a clearer path forward appears. Whatever the result, following Tesla is rarely boring.