Tesla shares dropped more than 8% on Tuesday, wiping out most of the stock’s gains following Donald Trump’s presidential victory. The decline pushed Tesla’s market capitalization below $1 trillion, marking its lowest valuation since November 7. The stock has now fallen 25% in 2025, significantly underperforming the Nasdaq, which is down only 1.5%. Since its record high in December, Tesla has lost more than 35% of its value, contributing to a $100 billion decline in CEO Elon Musk’s net worth.
The latest drop follows a report from Reuters stating that Tesla’s long-anticipated software update for its partially automated driving system in China has failed to impress users. The “navigate on city streets” feature reportedly fell short of expectations, especially given Musk’s previous claims about the company’s progress toward full self-driving capabilities. Some domestic competitors in the Chinese market offer similar or superior features at little to no additional cost, further pressuring Tesla’s position in the Chinese market.
Beyond concerns over product performance, Tesla investors are also reacting to Musk’s increasing political involvement. As the head of the newly established Department of Government Efficiency (DOGE) under the Trump administration, Musk has gained access to federal resources, including government computer systems and taxpayer data. His leadership in mass firings within agencies responsible for regulating Tesla has drawn significant scrutiny, fueling further unease among shareholders.
Musk’s controversial political statements have triggered protests at Tesla stores and service centers. At the same time, the company’s stock faced additional pressure following Trump’s announcement of broad tariffs on Canadian, Mexican, and Chinese imports.
Tesla’s financial performance has also been underwhelming. The company’s fourth-quarter earnings and revenue both missed analyst expectations, with automotive sales declining 8% year-over-year and operating income dropping 23%. The weakening demand is partly attributed to lower average selling prices across Tesla’s aging lineup, including the Model 3, Model Y, Model S, and Model X.
Tesla’s stock remains about 20% above pre-election levels, largely due to a 15% surge immediately after Trump’s victory. However, the stock’s recent struggles suggest that political connections and past gains are insufficient to reassure investors amid ongoing product and market challenges.
