Tesla: waiting for the death sentence to come

Tesla's stock price movement resembles a meticulously choreographed tragedy, having plummeted over 45% from its peak since the end of last year, like a kite with a broken string that has captured the attention of countless investors. This sharp decline has sparked market imagination of a 'golden bottom-fishing opportunity,' given that the company once reshaped the automotive industry as a disruptor, with its brand halo and technological innovation deeply ingrained in public perception. However, as the capital frenzy gradually fades, cold, hard data is revealing the hidden concerns beneath Tesla's glamorous exterior—an overvalued giant now mired in growth stagnation.

Against the backdrop of the expanding electric vehicle (EV) market, Tesla is showing signs of counter-trend weakness. In the first quarter of 2025, while the overall U.S. EV market saw an 11% year-on-year increase in sales, Tesla's sales declined by 9%, with its market share shrinking from a peak of 51% five years ago to 44%. The awakening of traditional automakers is reshaping the competitive landscape, with models like the Chevrolet Equinox—priced at $35,000 and offering a 300-mile range—acting as a wedge into the heart of the market. The situation is even more dire in Europe, where sales in France dropped by 36%, Germany saw a plunge of over 40%, and traditional EV strongholds like Norway and Denmark also showed signs of decline. Even in the UK, where Tesla recorded 7,200 sales, its market share still fell by 4 percentage points to 10.7%, like a drop in the ocean unable to turn the tide.

The Sword of Damocles hanging over Tesla doesn't end there. Elon Musk has admitted that escalating trade wars could become a fatal variable, exposing the fragility of its global supply chain—from battery components in Mexico to motor systems in China, rising tariff barriers will directly increase production costs. More critically, against the backdrop of continuous market share loss, Tesla's strategy of passing on higher costs through price hikes risks consumer backlash, as competitors offer similar performance at lower prices. When brand premium meets weak demand, Tesla's profit moat is being eroded from both sides.

The valuation paradox is particularly stark. Despite its stock price halving, Tesla's forward enterprise value-to-EBITDA ratio remains as high as 46x, down from its 12-month average of 60x but still far exceeding Amazon's 11.8x and Nvidia's 20x. While the market often justifies tech stock valuations with 'high-growth expectations,' Tesla's predicament lies precisely in whether its future EBITDA growth can bridge the gap between 46x and 60x. From a manufacturing perspective, a P/E ratio exceeding 50x is like a towering but precarious skyscraper. Applying the 'Davis Double Whammy' theory, a slowdown in earnings growth coupled with valuation compression could mean further downside for the stock.

A deeper crisis lurks in the cracks of Tesla's brand image. Left-leaning consumers make up a significantly higher proportion of U.S. EV buyers compared to the national average, and Musk's frequent conservative remarks are shaking the foundation of this core demographic. With rising price sensitivity and competitors offering better value, political alignment could be the straw that breaks the camel's back. For Tesla to regain momentum, it may need to dial back its political stance and refocus on innovations in energy storage and autonomous driving. But with the storm far from over, Wall Street's adage 'catching a falling knife leaves nine out of ten fingers injured' serves as a sobering reminder—what this company needs isn't a gamble on the bottom but a rational return to the fundamentals of manufacturing. The road ahead is long; tread carefully.

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