Qamar Nazir
In a startling turn of events, Tesla Inc. recently experienced one of its worst quarters since going public almost 15 years ago. In the first quarter of 2025, the electric vehicle (EV) giant lost almost 36% of its market value, wiping down an incredible $460 billion in market capitalization. Once hailed as the pinnacle of clean tech innovation and the hope of investors, Tesla is currently at the heart of a storm of political controversy, competitive challenges, and market uncertainty, many of which are directly related to its divisive CEO, Elon Musk.
Second only to the fourth quarter of 2022, when shares fell 54% after Musk’s tumultuous $44 billion acquisition of Twitter (now known as X), the fall represents Tesla’s third-worst quarterly performance ever. Investors were alarmed at the time when Musk abruptly sold off Tesla stock to finance the transaction. The fear is now different but just as strong: Musk’s increasingly complicated political life is seriously harming the business he helped establish as a leader in its field.
Tesla’s performance has undoubtedly been impacted by decreasing sales in China and Europe as well as increased competition from EVs, but many analysts think the true threat lies in politics rather than supply chains or production. Musk’s contentious nomination as director of the Department of Government Efficiency (DOGE), a cost-cutting organization established under President Donald Trump’s second term, was largely responsible for Tesla’s Q1 decline. Markets have taken note of the irony of DOGE, which is named after a cryptocurrency that Musk originally promoted online.
The DOGE office estimates that Musk’s actions have reduced federal spending by about $140 billion. However, that amount is vastly dwarfed by the $460 billion in Tesla’s market value that disappeared during that time. It appears that Wall Street is posing the straightforward query: At what cost?
Musk has admitted to the collateral harm. Originally designed to support a conservative state candidate for the Supreme Court, the event swiftly became a de facto damage management exercise. Musk continued, attempting to sound self-aware if not respectful, by saying, “This is a very expensive job is what I’m saying.”
However, the joke is becoming old for institutional investors and Tesla shareholders.
“Elon Musk was once the asset that supported Tesla’s exorbitant price tag. He now appears to be the risk, according to Karen Holtzman, a senior analyst at Trident Capital. “You cannot serve as the head of a large, publicly traded corporation and a federal agency while also working as a political activist without making some compromises. This is not what investors signed up for.
This sentiment is not unique. According to Edmunds data, Tesla has experienced record trade-ins over the last three months, especially from customers who are fed up with Musk’s blatantly political actions. Videos of Tesla vehicles being destroyed in parking lots, keyed, or defiled with political statements have been widely shared on social media. Once a sign of scientific prowess or environmental consciousness, owning a Tesla has been associated with political views. Furthermore, many people don’t want to make it.
Tesla’s rivals, meanwhile, have not remained motionless. With 32% of the EV market share in Q1 2024, compared to Tesla’s pitiful 6%, local behemoth BYD has significantly overtaken Tesla in China. While Tesla’s products have begun to appear antiquated and costly in a market that is becoming more and more crowded with high-performing competitors, BYD’s innovations in pricing and fast-charging capabilities have resonated with consumers.
The same is true in Europe. As a result of governments’ strict EV regulations, local automakers and nimble startups have inundated the continent with a wide variety of electric vehicles, many of which are suited to local tastes and budgetary constraints. Tesla is having trouble competing because of its comparatively small product portfolio and high price.
However, the most devastating critique of Tesla’s recent problems may come from within the corporate governance community rather than from rivals or markets. According to Jeremy Linwood, a corporate governance specialist at the Wharton School of Business, Musk has essentially resigned his position as CEO. His focus is divided between side ventures, political campaigns, DOGE, and X. He is no longer acting as a committed leader for Tesla, which is a serious concern.
According to Tesla insiders, an increasingly dispersed management team is now in charge of most operations. While daily operations go on, strategic planning, investor relations, and long-term innovation are all suffering from the absence of a unified vision or a strong leader leading the ship.
However, there is still hope. Tesla is still a dominant force in the US EV market, even with its recent downturn. The firm continues to dominate domestic EV sales, and its network of Superchargers is far more extensive and dependable than those of its rivals. In addition to having some of the strongest vertical integration and battery technology in the business, Tesla has structural advantages that its competitors are still vying for.
Veteran tech investor Mark Coulson views Tesla’s predicament as a time for reflection rather than a fall. Every IT giant experiences this. When Jobs was fired, Apple had it. During the dot-com bust, Amazon had it. Can Tesla make a course correction before long-term harm is done?
Musk must be at the forefront of that change, Coulson said. He is no longer able to serve as CEO part-time. The stakes are too high, and Tesla is too enormous. All right, if he wants to be in politics. However, he must then formally and fully relinquish control.
The world will be monitoring the second quarter to see what Musk does next, in addition to Tesla’s earnings. Will he put more effort into his political aspirations or redirect his attention back to the business that made him famous? The response may impact Musk’s legacy as well as Tesla’s future.