TLDR
- Tesla stock down 1.8% in premarket trading amid concerns about new model plans
- European sales plunged 37% in Q1 2025 while overall EU EV market grew 24%
- Questions surround Tesla’s strategy for launching cheaper vehicles using existing production lines
- Elon Musk promised to spend “far more” time on Tesla amid growing investor concerns
- Critics suggest Musk’s political activities with Trump administration may be hurting Tesla’s brand
Tesla stock fell in premarket trading on Thursday as investors processed mixed signals about the company’s product strategy. Tesla shares dropped 1.8% to $246.32, against a backdrop of broader market futures also trending lower.
The electric vehicle maker is facing multiple challenges. Sales in Europe tumbled 37% in the first quarter of 2025 despite a 24% increase in overall EV demand across the continent.
European customers purchased just 36,167 Teslas between January and March. This contrasts sharply with the broader EV market recovery in the region.
European Sales Challenge
The sales drop in Europe creates a fresh headache for Elon Musk. He’s currently working to combat a wider sales slump across the company’s operations.
Some industry watchers point to Musk’s political activities as a potential factor. Critics argue his vocal support for President Donald Trump and involvement with the Department of Government Efficiency (DOGE) may be alienating Tesla’s traditionally liberal-leaning customer base.
These political connections have reportedly led to boycott campaigns. Some extreme protesters have even conducted arson attacks against Tesla properties.
Meanwhile, the European EV market is showing strong recovery signs. Total electric vehicle sales reached nearly 413,000 units in Q1 2025.
This growth was particularly strong in key markets like Spain, Germany, Italy, and Austria. However, France saw EV sales decline by 6.6% after reducing government subsidies late last year.
New Model Uncertainty
One key factor worrying investors is the uncertainty around Tesla’s new model plans. During the recent earnings call, Tesla executive Lars Moravy confirmed that new models are still planned for this year.
However, his comments about using “existing lines rather than building new ones” raised questions. Moravy stressed that factory utilization is a primary goal for new products.
This approach could potentially limit Tesla’s ability to expand into new market segments. Traditionally, new car models require new designs, parts, and tooling – all involving major investment.
Investors have been hoping for a truly new model that could help Tesla compete in lower-priced segments. The company’s current average selling price of $39,000 is still nearly double that of Chinese competitor BYD, which averages around $20,000 per vehicle.
Wall Street analysts worry that simply offering cheaper versions of existing Models 3 and Y might not drive sufficient growth. Such a strategy could potentially hurt profit margins without expanding the customer base.
Gary Black, co-founder of Future Fund Active ETF, expressed concern on social media. He suggested that “more affordable trims [of existing models] will cannibalize higher priced Model Y and Model 3 trims.”
Black warned that if cheaper versions of current models are the strategy, “earnings trajectories will resemble Tesla’s experience from 2023 to 2024, when 20% price cuts funded by cost reductions caused analysts to cut earnings estimates by 50%-plus.”
During that period, Tesla’s actual earnings of $3.12 per share in 2023 fell well short of Wall Street estimates that had exceeded $6 in late 2022.
Musk has recently assured investors he plans to spend “far more” time focusing on Tesla. However, he provided no specific update on when a lower-priced model might be expected.
The company still plans to launch its driverless taxi service in Austin, Texas in June. This robotaxi initiative could provide a potential catalyst for the stock if successful.
The European Automobile Manufacturers Association noted that while EV sales are growing, their 15% market share remains “far from where it was expected to be” as the EU prepares to introduce new vehicle emission regulations.
Hybrid vehicles currently hold the largest market share in Europe at 35%, followed by petrol cars at 29%.
