Analysis
Analyst view
Tesla is melting down. Retail investors aren’t sweating it

Tesla is melting down. Retail investors aren’t sweating it

Henry Fisher

Senior Content Specialist

13 minute read

|26 Mar 2025

Table of contents

1.
Tesla’s brand meltdown
2.
Global fallout
3.
The bullish case for Tesla
4.
Betting on the bigger vision
5.
Tesla's advantage
6.
Conclusion

Tesla is in crisis. But retail investors? They’re still bullish.

Tesla has undoubtedly been one of the most divisive stocks over the past five years. On one side, there is the promise of insanely transformative innovation. Technologies like Robotaxis and humanoid robots offer a vision of the future that captivates many. On the other, there are deep concerns. Elon Musk’s controversies, Tesla’s stretched valuation, a barrage of negative headlines, and intensifying competition all raise red flags.

Tesla (TSLA:US) surged more than 90% following Trump’s election win, driven by optimism over Elon Musk’s perceived closeness to the new administration. But sentiment soured quickly. Tesla shares fell 50% from their December peak before rebounding sharply since March 11. A tug of war is clearly underway. Even as the stock declined, retail investors stepped in, accumulating shares at near-record levels. According to JPMorgan, retail traders have recently purchased a net $7.3 billion worth of Tesla stock over 12 consecutive trading sessions.¹Meanwhile, some institutional players and hedge funds were heading for the exits or building short positions,² while prominent insiders also reduced their exposure throughout the selloff.³Market analysts are split as well, with TipRanks data currently revealing a broad spread in price targets, highlighting both optimistic upside potential and cautious downside risks. The question is, who’s going to be right?

Let’s start with what’s going wrong. Tesla bears have plenty of ammunition on that front.

^{Image: TipRanks Analyst Consensus, CMC Invest, 24 March 2025}

Tesla’s brand meltdown

Tesla is burning. Its products, that is. At least ten dealerships, charging stations and facilities have been vandalised across America in recent weeks. In several cases, cars were set on fire. Videos circulating on social media show people defacing and destroying Teslas. In Las Vegas, several vehicles were torched outside a service centre, with the word “resist” sprayed in red across the front doors.⁴

So, what is behind this resistance movement? Musk’s alignment with Trump, his campaign against government waste, and his push for radical innovation have divided public opinion. Musk’s actions have consistently moved Tesla’s stock, often with dramatic consequences. His acquisition of Twitter, announced on April 26, 2022, is a good example, and potentially a useful parallel to the scenario at hand with the Department of Government Efficiency (DOGE). When Musk revealed plans to buy Twitter, Tesla shares fell nearly 38% over the following month. He also sold $8.5 billion worth of Tesla stock, raising concerns about political entanglements and whether he was losing focus on Tesla’s core business.⁵

To some, Musk is a visionary. To others, he represents a serious threat. Left-leaning publications have called him a “monster"⁶ and claimed he “embodies capitalism in decline,"⁷ a symbol of elite power, extreme wealth and a system viewed by many as broken. Although extreme views about Tesla are held by a small minority, the broader reputational consequences for the brand are becoming increasingly clear. It’s important to consider the potential ramifications among the 75 million Americans who voted for Vice President Harris in the last election (48.3% of the popular vote).⁸Tesla was once considered a favourite among the environmentally conscious left, but today it’s increasingly associated with right-wing ideology.⁹ Recent data from Edmunds shows that Tesla owners have been trading in their vehicles at record levels since Elon Musk aligned himself with Trump’s White House.¹⁰ The California New Car Dealers Association, in a report released 31 January, noted that Tesla’s dominance in the EV market is slipping, with five consecutive quarters of registration declines.¹¹

^{Image: Protestors demonstrate during a "Tesla Takedown" protest against CEO Elon Musk in New York in March, 2025. Getty Images.}

Political identity increasingly influences consumer choices.¹² According to research from the American Marketing Association, companies that take political stances face real risks because “political issues divide consumers into strong ‘for’ and ‘against’ camps (with few people in the middle)."¹³ The study adds, “companies with large market shares and extensive customer bases risk alienating more customers who disagree with their political stance than gaining those who agree with them."¹⁴ In a divided America, if someone doesn’t like your politics, they might not buy what you’re selling. That’s a big problem for Tesla. If we look further into the future and assume political division in America continues or worsens, could people who oppose Elon Musk for political, ethical or personal reasons choose to avoid his products in favour of competitors? Would they feel comfortable with Elon’s Optimus robot doing their dishes or looking after their children?

Global fallout

As political controversy intensifies in the US, its impact is reverberating across global markets, where rivals are capitalising on the disruption. Protests and incidents of vandalism have recently broken out in France and Germany.¹⁵Musk’s alignment with Donald Trump, who previously imposed tariffs on European goods and signalled he might withdraw military support for NATO, has fuelled the controversy. Then there’s the backlash over Musk’s perceived salute during Trump’s inauguration. The result has been a rapid and, in some cases, substantial shift in public sentiment towards Tesla across parts of Europe. In Germany, a recent survey of 100,000 respondents found that 94% would not consider buying a Tesla.¹⁶

This shift in sentiment is also starting to show up in sales figures. In Germany, Tesla’s February sales dropped by 76% compared to the same month last year. Tesla’s Model Y was the third best-selling EV in Europe in January, with 6,473 units sold. It trailed the Skoda Enyaq, which led with 7,163 units, and the Volkswagen ID.4 with 6,772. Notably, Enyaq sales rose 47.7% year on year.¹⁷ For Tesla, however, January marked the Model Y’s lowest monthly volume in 28 months. Year on year, sales fell 43.6%. This sharp decline came despite strong momentum in the broader European EV market, where sales rose 31% during the first two months of 2025.¹⁸

Competition is even fiercer in China. Tesla’s wholesale deliveries from its Shanghai plant fell 49% in February to 30,688 vehicles, the lowest since July 2022 and the fifth consecutive monthly decline.¹⁹ The slump contrasts sharply with domestic rival BYD (1211:HK), whose sales surged 161% year on year.²⁰ BYD started as a battery maker. Now it’s neck and neck with Tesla, delivering 1.76 million EVs in 2024 compared to Tesla’s 1.79 million.²¹ Its international sales have also doubled over the past year. BYD is also making technological breakthroughs. Its new battery and charging system can deliver 400 kilometres of range in just five minutes.²²

Among other criticisms, bearish investors have consistently flagged Tesla’s valuation as a major concern. The so-called “Magnificent Seven” currently trade at price-to-earnings ratios between 20 and 40, with NVIDIA at the higher end of that range. Tesla’s P/E ratio, by contrast, is over 140. At the moment, only one large-cap US tech stock trades higher: Palantir. Ultimately, the headwinds facing Tesla are serious. The company is under pressure on multiple fronts. But that’s only half the story. Let’s take a look at why many retail investors are still backing it.

The bullish case for Tesla

The retail perspective on Tesla is often overlooked, largely because it operates on a different wavelength. It finds nuance in the headlines and is shaped by a more imaginative and optimistic view of the company’s long-term potential. These investors obsess over the details, dissect data in online communities, and often spot trends or inflection points before they show up in the mainstream narrative. For instance, on the surface, it might seem like other automakers are catching up or even pulling ahead in sales. But retail investors understand that selling electric vehicles is one thing. Making money doing it is another.

Last year, several major automakers including Ford (FORD:US), GM (GM:US), Mercedes-Benz (MBG:DE) and Volkswagen (VOW:DE) announced plans to delay or scale back their EV strategies.²³ They are confronting the hard realities of transitioning away from internal combustion engines. Scaling production profitably requires entirely new technology platforms, reworked supply chains and significant manufacturing overhauls. Traditional automakers also face the added burden of potentially cannibalising their existing ICE businesses. Tesla does not have that problem. As a company built around EVs from day one, it never had to pivot from legacy systems. It has already scaled production, refined its technology and structured its operations specifically for an EV-first future. That gives it a significant head start.

While legacy automakers are still trying to make the numbers work, Tesla is already producing EVs profitably. According to Boston Consulting Group, U.S. automakers lose roughly $6,000 on every $50,000 EV they sell in the American market. The situation is even more dire for EV upstarts like Rivian (RIVN:US), which lost $39,130 on every vehicle it sold last quarter.²⁴ Tesla, by contrast, maintains a gross profit margin of around 17.9%. By 2024, its gross profit per vehicle had reached approximately $7,900.²⁵Many investors see the potential for this lead and profitability to compound over time as Tesla continues to improve its manufacturing efficiency.

Technical Outlook: Tesla’s share price found a bottom around $217 in March, which now acts as a key support level. Looking ahead, the $300 to $320 range will be important to watch. The $300 mark is psychologically significant for investors and also lines up with previous highs seen in January 2021 and July 2023.

Betting on the bigger vision

Manufacturing isn’t the only lens through which retail investors view Tesla’s long-term potential. Artificial intelligence and robotics are central to the thesis. The logic is simple: the addressable market for technologies like humanoid robots and Robotaxis is exponentially larger than the market for cars. For context, the automotive market was only worth around $2.9 trillion globally in 2022.²⁶ Even if Tesla were to significantly grow its market share, the upside as a pure car company remains limited by comparison.

As prominent Tesla bull Dan Ives puts it: “Our bullish thesis on Tesla is that 90% of the future value will be autonomous and robotics driven. That said, Musk needs to lead Tesla through this bumpy period and better balance DOGE efforts.” Unlike electric vehicles, which are becoming an increasingly competitive market, autonomous vehicles are seen by some as a "winner takes most"²⁷ or even a "winner takes all"²⁸ arena. ARK Invest CEO Cathie Wood champions this view. She believes Tesla is in pole position, particularly in the United States. Wood maintains an ambitious $2,600 price target for Tesla by 2029.²⁹ Her conviction is anchored in the Robotaxi opportunity, which she believes could generate between $8 trillion and $10 trillion in revenue by 2030.³⁰ If realised, this could transform Tesla from a carmaker into a dominant software and mobility platform company.

Tesla's advantage

So, what’s the logic behind this “winner takes most” thesis? There are a few key factors. First is real-world AI data. Tesla’s software has a data advantage. According to Wood, it’s a self-reinforcing loop. More cars on the road means more data. More data means better AI performance. Better AI leads to safer, more capable autonomous driving, which in turn attracts more users and data.³¹ARK estimates that Tesla vehicles drive over 5 million miles per day in Full Self-Driving (FSD) mode, and more than 87 million miles daily across the entire U.S. fleet. These miles generate valuable real-world video data that Tesla uses to continuously train its AI models.³²

In contrast, Waymo, Google’s self-driving unit and arguably Tesla’s biggest competitor in autonomous driving, reportedly logs just 70,000 miles per day.³³ Tesla relies on cameras and neural networks to power FSD in consumer-owned vehicles. Waymo uses a sensor-heavy and expensive setup with LIDAR, radar, and cameras. Its geofenced Robotaxi service operates in select cities, limiting exposure to unpredictable real-world conditions. Tesla’s broader deployment across diverse environments provides a much richer dataset. This real-world scale may prove to be a key advantage in the race for autonomous driving leadership.

Unlike major competitors in the space, Tesla also benefits from vertical integration. It develops its own chips, builds its own vehicles, and controls key software and hardware layers. That level of integration gives it cost and scale advantages competitors currently lack. The upside scenario is that, over time, Tesla transitions from a relatively low-margin hardware business to a higher-margin software and services model, generating recurring revenue through autonomous taxi fees, subscriptions, and other services.

^{Image: Tesla's vertical integration and its competitors, Not a Tesla App (}^{https://www.notateslaapp.com/}⁾

While autonomous vehicles are a major focus, Tesla’s ambitions in humanoid robotics could ultimately prove even more transformative. According to ARK’s research, humanoid robots could represent a global revenue opportunity exceeding $24 trillion annually.³⁴Theoretically, if Tesla captured just 5% of that market, it would amount to $1.2 trillion in revenue. That is roughly 12 times the $97.7 billion in revenue Tesla reported in 2024.³⁵

As Elon Musk stated during Tesla’s first-quarter earnings call in 2024: “If you've got a sentient humanoid robot that is able to navigate reality and do tasks at request, there is no meaningful limit to the size of the economy."³⁶ In a recent company All-Hands live stream, Musk stated that “My prediction is that Optimus will be the biggest product of all time by far. Nothing will even be close. I think it will be 10x bigger than the next biggest product ever made."³⁷ These robots could have transformative applications, from household assistance to industrial and manufacturing tasks. Even if some consumers are hesitant because of Elon Musk’s politics or simply don’t want one in their home, demand from factories and industrial settings could still be significant.

However, a key challenge to the “winner takes most” thesis is the rapid and unpredictable pace of AI innovation. Fierce competition among players like Nvidia and DeepSeek, or OpenAI and Grok, highlights how rapidly the landscape is shifting. It remains unclear which technologies will ultimately prevail and where long-term value will concentrate. Could new entrants in autonomous driving leapfrog Tesla with cheaper solutions powered by more advanced AI? If so, the company’s perceived moat may be far narrower than many investors currently believe.

Regardless of whether the AI landscape becomes crowded or fragmented, Tesla may still hold a strategic edge. Tesla is expanding into verticals such as energy storage, insurance, and grid services, positioning itself at the intersection of multiple generational shifts. Just as Google came to dominate search and Meta captured social media through powerful network effects, Tesla is building an integrated ecosystem of products and services. This time, the verticals are broader, the ecosystem deeper, and the potential revenue streams even more compelling.

^{Image: A map of Tesla’s products and services, Tesla All-Hands live stream, Q1 2025}

Conclusion

All in all, the optimistic retail view of Tesla stock is like a ladder. Cars are simply the first rung. Where bulls see Tesla climbing steadily toward a larger vision, a more grounded metaphor right now might be a castle under siege. With intensifying competition in the EV market, the company’s outer walls are being tested. For now, loyal holders may retreat to more defensible positions within the castle. Robotaxis and robotics form that inner line of defence, the bold, long-term bets that help support Tesla’s valuation. But at some point, the company needs to push back and win where it matters most. In the world of investing, belief can only hold out for so long.

Investors should also keep the broader macroeconomic backdrop in view. Tesla remains highly sensitive to liquidity conditions and the business cycle. COVID-era stimulus and speculative fervour helped propel the stock to dizzying heights in 2020. Then there is the Musk factor. He is unpredictable, polarising, and deeply entwined with the company’s narrative. All of this makes Tesla harder than ever to predict, and harder still to ignore.