Not long ago, the media seemed to be in tune, running stories about how Elon Musk's Tesla was one of the biggest beneficiaries of Donald Trump's victory in the U.S. presidential election.
Initially, this sentiment appeared to be true: Tesla stock rose a staggering 90% between November 5 and mid-December, despite the lack of compelling fundamental reasons behind this rally.
Investors apparently believed the company's future was secure with a powerful ally in the White House. Regulatory scrutiny? A thing of the past, with the hope that Tesla's trajectory would be upward from then on.
However, the optimism was short-lived. Since December 17, Tesla shares have plunged nearly 37%, and there is little sign of a turnaround in the trend. Ironically, investors have Elon Musk himself to thank for this plunge.
His decision to dive headlong into U.S. politics, becoming not only a highly visible figure, has alienated a portion of the public, both in the U.S. and abroad. For some, Musk and his products have become toxic.
The impact is already evident. In January, Tesla vehicle sales in Europe plummeted by a staggering 45%. The company only sold 9,945 cars in the region, down from 18,161 in the same month of 2024.
Another growing concern among investors is Musk's involvement with the Department of Government Efficiency, which is seen as a potential distraction, pulling his attention away from Tesla.
To make matters worse, Tesla's challenges go beyond public relations. Geopolitical tensions between the U.S. and Europe could escalate further, posing an additional threat to the company.
A key factor in this equation is the so-called EU Anti-Coercion Instrument, a regulation passed at the end of 2023. This law allows the EU to retaliate against third countries - such as the United States - that attempt to exert pressure on European policy through trade restrictions.
In this framework, the EU can impose countermeasures on companies and individuals accused of instigating such actions. If the U.S. increases tariffs on European products, Tesla could be in the crosshairs.
Even if geopolitical tensions do not escalate further, Tesla faces fierce competition. The company is losing market share to competitive Chinese EV manufacturers and traditional automakers.
Once considered an industry pioneer with little competition, Tesla is now facing well-established automotive giants that have caught up in both technology and production scale.
What does the continued decline in Tesla's stock mean for Tesla?
If the downward trend persists, the company's financial problems could send shockwaves through the broader stock market. In a worst-case scenario, this could turn into what Nassim Taleb would call a true “black swan” event: unexpected, disruptive, and with profound consequences.
