Tesla Stock Outlook: Tariffs, Musk's Role, and European Woes

Tesla stock sees a mix of influences from tariffs and Musk's return. However, European sales declines and high valuations raise concerns for investors. The market's volatility adds to the uncertainty surrounding TSLA's performance.

Date: 31-03-2025

AI Rating: 4

Impact of Auto Import Tariffs
Tesla could see a positive impact from the newly announced 25% tariffs on auto imports, mainly because unlike competitors like GM and Ford, which manufacture EVs in Mexico, Tesla produces vehicles in the U.S. This strategic advantage may allow Tesla to enhance its competitive pricing and capture a larger market share. However, it is important to remember that Tesla may still face increased costs due to pricier imported components, which could offset some of the benefits of these tariffs.

Musk's Influence
Elon Musk's renewed involvement with Tesla is a positive note, as his leadership during critical times often reassures both employees and investors. Musk's recent statements about holding shares and focusing on the company's ambitious roadmap could boost investor confidence. Nevertheless, concerns surrounding his political engagements could potentially overshadow this positive aspect.

European Sales Decline
The reported 40% year-over-year decline in Tesla's vehicle registrations in Europe raises alarms. As Tesla's performance in Europe diverges significantly from the overall EV market growth of 26%, this trend may imply that customers are delaying purchases while anticipating newer models, such as the refreshed Model Y. This situation is compounded by concerns regarding Musk’s political activities alienating Tesla's progressive customer base.

Volatility and Valuation Risks
While Tesla stock has shown an impressive rise over the years, the volatility in its returns—marked by dramatic fluctuations such as 102% gains in 2023 followed by severe drops—suggests potential risks ahead. Moreover, the current valuation at 100x consensus 2025 earnings casts shadows over its near-term performance. As deliveries have declined for the first time in over a decade, and with increasing competition from emerging Chinese EV markets, concerns are rising regarding Tesla's long-term viability at its current stock price. Coupled with the decreased brand image and resale values being reported, investors should weigh the risks carefully. The stock currently seems overvalued, reflecting bearish sentiment towards its future performance.

Stocks: TSLA GM F