Tesla Faces Challenges After Record High, Historical Trends Offer Insight

Tesla (NASDAQ: TSLA) reached an all-time high of $480 per share in December, following Donald Trump’s presidential election victory. Market speculation suggested that the connection between CEO Elon Musk and President Trump might positively influence Tesla’s prospects, but those expected benefits have yet to emerge.

In fact, Tesla’s stock price plummeted over 50% from its peak in early March, marking a significant event that has occurred only three times since the company went public in June 2010. Although shares have recently shown some recovery, they remain 45% below their previous high. History indicates, however, that Tesla may eventually bounce back from this decline.

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Historical Patterns Suggest a Potential Recovery for Tesla

As previously mentioned, Tesla shares have suffered a decline of at least 50% four times since its initial public offering. Analyzing the first three instances can provide insights into how the current situation may unfold:

• 2017: Tesla shares peaked at around $26 in September 2017 but dropped 54% by June 2019 due to manufacturing issues with the Model 3, delays with the Model Y, and unsatisfactory financial results. Shares rebounded to a new high in December 2019, spurred by the unveiling of the Cybertruck and a bullish forecast from Ark Invest CEO Cathie Wood. The stock returned 394% during the year following its low in June 2019.
• 2020: Shares peaked around $61 in February 2020 and fell 60% by March 2020. This decline was linked to the broader market drop caused by COVID-19, leading to factory closures and supply chain disruptions. However, the stock reached a new high by June 2020 and yielded an impressive 804% return in the year after its March low.
• 2021: Tesla shares hit approximately $410 in November 2021 but faced a 73% decline by December 2022 due to supply chain issues, weak demand amid rising interest rates, and perceptions of Musk’s distraction from managing Tesla following his Twitter acquisition. Shares soared again in December 2024 after Trump’s election, resulting in a 140% return in the year following the December 2022 low.

Overall, historical evidence suggests that Tesla has the potential to recover from its declines. The stock not only rebounded from the last three substantial downturns but also recorded an average return of 446% in the year following such drops. While the current market situation is uncertain, this trend provides hope for current shareholders.

Nonetheless, there are significant challenges. This recent decline appears to be a continuation of previous issues. The anticipated rebound was mainly fueled by hopes tied to Musk’s relationship with Trump, while Tesla struggles with persistent weak demand and Musk’s increasing distraction with other ventures.

Image source: Getty images.

Tesla Must Address Demand and Launch Robotaxis

Globally, Tesla’s demand is weakening. The company suffered losses in market share across its primary markets in 2024, a trend that is intensifying in 2025. In January, market share dropped nearly 7 percentage points in the U.S., 8 points in Europe, and 2 points in China.

Increased competition from other manufacturers is a significant factor in this decline. Tesla, facing an aging electric vehicle lineup, plans to introduce a more affordable model, possibly named the Model Q, which may address some of these challenges. However, Musk’s political pursuits might also be detracting from his focus on Tesla.

In Europe, Tesla sales fell by 49% in the first two months of 2025, even as the broader electric car market surged. This concerning data implies Musk’s public actions could be alienating potential buyers. Furthermore, Musk’s heavy involvement in his Department of Government Efficiency (DOGE) raises doubts about his commitment to Tesla’s daily operations.

Additionally, Tesla’s upcoming robotaxi launch in Austin, Texas, slated for June, will be critical as the company seeks to regain momentum. Competitors like Alphabet’s Waymo have already established services in multiple cities, placing Tesla at a disadvantage. The pressure is on for a successful rollout to catch up with competitors.

Crucially, Tesla’s full self-driving software relies solely on computer vision, making robotaxis less expensive and more scalable compared to Waymo’s lidar and radar-dependent models. While this approach reduces costs and time, it poses execution risks. Waymo’s edge and sensor-equipped robotaxis could provide enhanced safety features.

Here is the key takeaway: Tesla shares have historically fallen by more than 50% on three occasions, always bouncing back with triple-digit returns in the year after hitting the bottom. For this trend to persist, Tesla must rectify its demand issues and maintain brand integrity while successfully launching its robotaxi service. Continued decline may occur without these vital catalysts.

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*Stock Advisor returns as of March 24, 2025.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Trevor Jennewine has positions in Tesla. The Motley Fool has positions in and recommends Alphabet and Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.