Why Tesla Stock Has Taken A Nosedive

Forbes

Elon Musk claims the carmaker will someday be the most valuable AI company in the world thanks to the reams of video data collected by its cars. Does all that data really give the company a competitive advantage?  Read the full story on Forbes: https://www.forbes.com/sites/alanohnsman/2025/03/10/why-tesla-isnt-the-ai-powerhouse-musk-says-it-is/  Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1  0:00 Introduction 3:31 Tariff Whiplash: What Are Trump & Elon Musk Doing To Our Government 8:25 Tesla's Troubled Past 14:58 Tesla's Recent Stock Problems 18:38 What's Next For Tesla?  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript  Stay Connected Forbes newsletters: https://newsletters.editorial.forbes.com Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com  Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.

Transcript

00:00Hi, everybody. I'm Brittany Lewis, a breaking news reporter here at Forbes. Joining me now

00:07is my Forbes colleague, Alan Onsman, who's a senior editor and author of the Current

00:12Climate newsletter. Alan, thanks so much for joining me.

00:15Thanks for having me.

00:17U.S. markets have continued to tumble this week amid President Donald Trump's tariff

00:23whiplash. He hasn't really done much to quell economic fears. He said we're in a period

00:28of transition and he's also has not ruled out a recession. A company that encapsulates

00:33this time and this trend of stock prices plummeting is Elon Musk's Tesla. As we know, Elon Musk

00:40is the face of Doge, a seemingly trusted advisor to President Trump and, according to Forbes,

00:45the richest person in the world. Monday was a particularly bad day for Tesla. I want to

00:50read some reporting directly from one of our colleagues, Derek Saul. Quote, Tesla stock

00:55officially traded lower Monday than it did ahead of President Donald Trump's November

00:59victory, wiping out what was once a 91 percent gain for shares of the electric vehicle company

01:05run by Trump's Lieutenant Elon Musk as Tesla becomes the face of the ongoing stock market

01:10slide. To start off the conversation here, can you explain why exactly Tesla is cratering?

01:16Well, there are many reasons for that. There was what used to be called irrational exuberance

01:24around the stock last year after the Trump election because Musk had been so generous

01:29in his financial support for Donald Trump, upwards of well north of $200 million, maybe

01:35as much as $300 million in different forms of support. Developing this close relationship

01:40with Trump was seen as highly beneficial after Trump won last November. And Tesla shares

01:45just exploded. So this incredible run where they go from about 240 bucks a share prior

01:52to the election to $479 a share in mid-December, it was just nuts. So it basically doubled,

01:59you know, in just over a month. And I couldn't begin to tell you why people were willing

02:07to pay that much for it because nothing had fundamentally changed with Tesla's business.

02:13And the problem is Tesla's core business is declining right now. Its core business is

02:19selling electric cars, batteries. That accounts for 85 to 90 percent of its actual revenue.

02:29You know, there is some people value it. Elon wants people to value it as an AI company.

02:35And because of that, it gets a multiplier effect on the value of the stock. Well, maybe

02:39it'll be an AI company someday. But today, its business is building and selling electric

02:46cars and batteries. That's it. And that business is declining. In 2024, Tesla posted its first

02:56annual decline in sales globally since it became a public company. That trend, unfortunately,

03:04is accelerating in Q1 of 2025. All of the numbers coming out of key markets in Europe,

03:11in China and the rumors here in California, which is its top market in North America,

03:17that it's down dramatically in all of these markets. China is particularly worrisome because

03:21China has become the single biggest source of Tesla's profit. It has lower costs there.

03:27It's been put in a very sort of advantaged position by the Chinese government. And so

03:32that's allowed Tesla to have very like fat profit margins for the last few years. Any

03:37sign that China is reversing causes investors and analysts to get very nervous. But the

03:44initial data we're seeing from the first quarter of the year is that Tesla is going to have

03:50an it's going to be an ugly quarter for their sales. So that's one of the problems. And

03:54then add to this now the association that Elon has with Donald Trump, which is increasingly

04:02negative. And there's a simple reason for that. Tesla's core buyers are not the same

04:09as Donald Trump's political base. The company has relied on people who generally identify

04:16as Democrats, who care about the environment. You know, it's a higher net worth, better

04:20educated customer base in many cases. That group is becoming very put out by Elon's public

04:29behavior, his public comments, his association with the Trump administration. So if you are

04:34a public company and your core buyer base doesn't really like what the CEO is doing

04:40and the CEO is so incredibly public, is the face of the company. When things get negative,

04:48that's you know, the company is going to going to take a beating. And of course, we've seen

04:51news reports of protests at Tesla stores, boycotts being talked about. Tesla charging

04:57stations have been vandalized and set on fire. These aren't good signs for a public

05:02company. So bottom line, his tight association with the Trump administration combined with

05:09a decline in the base business. That's why Tesla has been coming down so rapidly.

05:14Alan, it's really interesting because I largely cover politics. And over the past few months,

05:20while President Trump's approval rating really has remained unchanged, Elon Musk's has taken

05:25a hit. And I think that's what you're saying here that can explain in part some of these

05:29stock prices taking a tumble here. You've covered Tesla actually since 2006. Have you

05:35ever seen anything like this where you're saying, hey, there's going to be a really

05:39ugly quarter here and the stock prices are nose diving in this way?

05:45Since well, the company I've covered them since 2006 and the company's been public since

05:502010. And periods of volatility are the norm for Tesla. That is absolutely not unusual.

05:58What we've seen over really since 2020, that's that's kind of one point at which everything

06:04begins to change. In Tesla's first decade as a public company, it was reported regularly

06:10reporting losses, big losses. And yet the market cap kept rising. In 2020, even though

06:18Covid was happening and so things are generally bad, Tesla opened its Shanghai factory in

06:23China. And literally from the beginning of having manufacturing operations in China,

06:28the Tesla story really changed, where suddenly the EV business was becoming profitable and

06:34Tesla became extremely profitable. In fact, among automakers, it has margins that are

06:40the envy of the of the industry. A good, profitable automaker might have a five or six or seven

06:47or eight percent margin. Tesla was routinely in double digits, like, you know, 20 plus

06:51percent profit margin. Remarkable. That is changing now. So we have seen periods of stock

07:00volatility for sure. If you look at Tesla's chart, it has gone up a lot over the years,

07:06but that's marked by some, you know, some really wild gyrations at times. We're in another

07:11one of those right now. And so this current phase is the Trump phase. So it begins with

07:17the bump that occurred on November 5th when Trump won the election, the rise. And now

07:25we're seeing the crash of that at the moment. Obviously, additional external factors like

07:31tariffs because Tesla is a manufacturer. They need steel. They need aluminum. They need

07:36all sorts of electronics, all, you know, so many things that are brought in from other

07:41countries, both in North America and from abroad. So Tesla is not immune to the impact

07:47of Trump's tariffs. And so it's going to cost more to make its products. And so that adds

07:54challenges as well. So, yeah. Have we seen volatility with Tesla before? A hundred percent.

08:01There have been some very grim periods for the stock, but the phase we're in now is a

08:06little different. And the concerns are, is this period of extraordinarily high profitability

08:12that it's enjoyed since 2020 through last year, is that period ending or not? So I think,

08:20you know, maybe some people are going to sit on the sidelines for a while and see how things

08:24shake out. Well, President Trump and Elon Musk, it's almost like they knew you and I

08:29were going to be talking about this afternoon because they had a meeting at the White House.

08:33They were talking to reporters. They were talking about Tesla and President Trump vowed

08:37to buy Tesla. This is what Elon Musk said, quote, As a function of the great policies

08:42of President Trump and his administration and as an act of faith in America, Tesla is

08:48going to double vehicle output in the United States within the next two years. What do

08:52you think of that announcement? And do you think how likely is that going to come into

08:56fruition? Because you wrote in your latest piece for Forbes regarding Tesla that Elon

09:01Musk does have a history of over promising and under delivering.

09:05Yeah, doubling U.S. output in the next two years, I don't know how that's conceivable.

09:12There's some headroom. The Cybertruck, for example, has been a very poor seller. You

09:18could use some of that capacity to to build other things. But doubling their U.S.

09:25production capacity, they also have to have demand for the product. And right now they

09:31have a demand problem. They don't have they don't they're not under, you know, it's

09:35not an undercapacity problem. They have too little demand.

09:39I would say that is a I wouldn't I wouldn't count on that materializing in two years.

09:46They have two U.S.

09:47plants. They have their Fremont, California plant that has about a half million vehicles

09:50a year. And then they have their Austin, Texas factory, which currently has capacity to go up to

09:56about a half million, but is below that.

09:58It's probably closer to 300,000 right now.

10:01I don't see realistically how they have the ability within a two year period to increase

10:08production that much.

10:10So that that really I'm not sure I can take that comment very seriously at this point.

10:16It takes a while. If you are increasing production at a big factory, you have a lot of

10:21logistics. A lot of things have to be lined up.

10:24You've got to get the parts, you get your suppliers ready.

10:26You've got to staff up.

10:28It doesn't happen magically.

10:29It doesn't happen overnight.

10:30And there are local permits that you need to have, including things like air pollution.

10:35So, for example, their California plant, Fremont, it's maxed out.

10:39Plants produce a certain amount of pollution, air pollution, just from doing their basic

10:44operations, has nothing to do with the vehicles.

10:46Just by building things, you emit pollution.

10:50Right now, Fremont, Tesla's Fremont plant is maxed out, so they cannot do an additional

10:56100,000, 200,000.

10:57And that's because of local pollution rules and state pollution rules.

11:01They're they're maxed out.

11:02I don't know what their ceiling is in Austin, Texas, because it's Texas.

11:06I would assume it's much lower.

11:10It's less strict.

11:12So, sure, they could probably add a couple hundred thousand units of production in Texas.

11:17But short of that, they're going to have to open a brand new facility.

11:20They are adding a production line for their semi truck, which is delayed by several years

11:26in Nevada at this point.

11:29But that's not going to be hundreds of thousands of vehicles, semi trucks.

11:32You don't build that many a year, maybe 40,000, 50,000 tops.

11:36So claiming that they're going to increase by that much seems like a stretch.

11:42Elon Musk and Donald Trump have really gone hand in hand in President Trump's second term.

11:47Elon Musk is the face of Doge.

11:49He seemingly has been working on Doge nonstops, which begs the question, does he have

11:55time to even be the CEO of Tesla?

11:58From your reporting, from what you're seeing, what do investors think about Elon Musk as

12:04well as what you're saying? He could potentially be damaging the brand of Tesla as well

12:09as is he an absentee CEO?

12:12Yes, he is.

12:16He is not running the company day to day.

12:19I'm sure he's getting briefs and updates, but he simply does not have the time to sit

12:26down. He's not doing extensive meetings.

12:28He's not getting the kinds of reviews.

12:31The CEO is a full time job and there's a reason why Tim Cook just runs Apple, Sundar

12:38Pichai just runs Alphabet.

12:40These big companies, they're big and complex with all sorts of complicated issues about

12:45suppliers and international problems and different things that are happening.

12:50You need to stay completely focused.

12:51It is simply not possible to do everything he is engaged in and do it well.

12:59And this would perhaps also explain why there is some nervousness around Tesla, because

13:03he has become so fully engaged in the Doge project.

13:08That's clearly chewing up a lot of time.

13:11I mean, he's in the White House with Donald Trump today.

13:13That means he's not meeting with folks at Tesla and he's not focused on what needs to

13:20happen with that company.

13:21And a great example of this, Tesla, their model line, the company's model line is getting

13:26old. The newest product is the Cybertruck.

13:29He said it could be selling 200,000 to 500,000 units a year.

13:32It's not. It sold about 40,000 last year and that's probably the peak.

13:38So that would be a flop if you are counting on a high volume product and you sell maybe

13:45a tenth of what you were promising.

13:47It means your planning wasn't very good.

13:50Tesla probably needs to be more focused on fresher, more affordable products.

13:55Things that are in the $30,000 price range.

13:58And perhaps they will add some lower priced variants this year.

14:02But the model line looks a little stale.

14:05And you have other companies like Kia and Hyundai and General Motors that have really

14:09fresh, interesting, new, affordable EVs.

14:12So that's creating additional competitive challenges.

14:14He's not focused on that.

14:16So I mean, one could ask objectively, why is Tesla's board, the board of a public

14:22company, not intervening and saying, you know, we probably do need at a minimum a

14:28president, a COO, a day-to-day manager of the company.

14:32No one holds that title in Tesla.

14:34They're a CEO and that goes down to like senior vice president.

14:37There's nothing in between.

14:38So he has to sign off on everything at the end of the day.

14:42And he's doing a lot of other things because it's Noge, it's SpaceX, it's the boring

14:47company, it's Neuralink, it's XAI.

14:50I mean, just this laundry list of companies, it is simply not realistic that he has the

14:55bandwidth or the capacity to do that.

14:58I'm curious if you think then money talks, because let's read some numbers here.

15:03His net worth has dropped by over one hundred and thirty billion since December, according

15:07to us. And on Monday alone, it plunged twenty three billion dollars as Tesla's stock

15:13price plummeted. And since it's affecting his pocket daily, do you think this is going to

15:17make him change course in any way?

15:20No, no, I actually don't.

15:23I don't think that that really influences him.

15:26I think he likes being the wealthiest person in the world, but I don't think it's his

15:30primary motivation.

15:31I think he's more motivated by attention than anything else.

15:36So these big hits to his net worth are clearly noticeable.

15:41But I, you know, I don't know.

15:44Once you're once your net worth is above like fifty billion dollars, you know, it all

15:48becomes sort of imaginary.

15:50Right. It's like, is it real?

15:52And once you can lose billions and billions and still be the richest person in the world

15:56easily. Yeah, I'm sure I don't even think it matters anymore.

15:59But the market cap for Tesla is down hundreds of billions of dollars.

16:03So what do you think is the best course for Tesla, for Elon Musk to separate himself from

16:09the Trump administration or Elon Musk to separate himself from Tesla or Elon Musk and

16:14Tesla almost one in the same?

16:16Is he the brand?

16:18He is the brand, and that seems to be where perhaps the board has put itself.

16:23It's like, look, we know this is not the way it should be, but this is how it is.

16:27And we're going to have to live with it.

16:30It's really hard to find another example of a company that is so profoundly dominated

16:37by one individual. Perhaps, you know, Mark Zuckerberg at Metta would be the closest

16:41parallel, I guess.

16:43But, you know, Metta is not suffering quite as much in the market as Tesla has been.

16:48Objectively, if I were called in to advise the company, I would say you need a real CEO.

16:54You need a COO.

16:56You need a president. You need a full management team.

16:59And probably you should recruit some talent from the traditional auto industry, people

17:03who are expert at manufacturing.

17:06You know, they've built what has become a remarkable brand.

17:10You cannot take away from the fact that Tesla, you know, defines the EV market.

17:15It has enjoyed this really rare space.

17:20And what we are seeing right now is that it's they're losing it.

17:23It's fraying.

17:25And it's not great at the moment.

17:28It could be reversed if the right steps were taken, but it could get a lot worse.

17:34And again, because of his public role, he's wearing all of these hats.

17:40But I think his willingness to jump into the public space in a political position is

17:47a deeply unwise thing to have done.

17:49There's that famous quote from Michael Jordan back in the 90s about why he didn't come

17:54out and make political endorsements.

17:58And he said, because Republicans also buy sneakers.

18:01You know, he intentionally did not want to be political one way or the other.

18:06And that's a rule of thumb, I think, for most public companies, which is there's

18:09really no upside to being overtly political.

18:13When you're a public company selling products to everybody, you want everyone to

18:16buy. You don't want to turn anyone off.

18:19He's made a different calculation.

18:21And again, as mentioned earlier, in the case of Tesla, because if you look at the

18:25demographic data, who their buyers are, where their buyers are.

18:31They're not in red states, they're not in rural places and they're generally not

18:36Republican. It sounds like based on what you're saying, based on the stock prices,

18:42Elon Musk is now tasked with making Tesla great again.

18:46And as I said earlier, one of the ways he wants to do that is double vehicle output

18:50in the U.S. over the next two years.

18:53But as you said, Tesla buyers are not really a Trump base.

18:57So he's walking this interesting line here.

19:00Not as many people are buying.

19:02People are protesting Tesla.

19:04What do you think is next for the company?

19:06Well, we'll see, because, you know, the press conference today, Trump is now

19:12actually like because he's embracing Elon and the brand, maybe they'll see some new

19:19attention in red states.

19:22You know, Texas might buy more cyber trucks.

19:25I mean, maybe maybe there'll be some response from from the Trump base.

19:30But, you know, we'll see, because obviously at the same time, you know, Trump has sort

19:39of disabled a lot of the the incentives and federal programs that supported electric

19:45vehicles. He's ended federal funding for a public charging network.

19:49He's eliminated the seventy five hundred dollar tax credit for the purchase of a new

19:53electric vehicle.

19:54And his administration is rapidly sort of, you know, rolling in or unwinding programs

20:00that that flourish under the Biden administration that help people get an electric car

20:05and charge the electric car and live with it.

20:07So very mixed messages, I would say, you know, maybe Republicans will become bigger buyers

20:14of EVs possibly.

20:17I'm not sure I would bet on that in the short term.

20:20I think the best solution would actually be perhaps it's time for a management change at

20:24Tesla and some new products.

20:27Well, Alan, I certainly appreciate your insight here.

20:30I always appreciate your reporting.

20:32Thank you so much for joining me.

20:34Thanks for having me.

Category

Transcript

Recommended