Tesla (TSLA -5.63%) investors are no strangers to challenging times. But these last few months are putting their loyalty to the test. The electric vehicle (EV) maker has seen shares drop 33% year to date over concerns about its CEO, Elon Musk, who made a controversial foray into politics.
The company’s first-quarter deliveries report provided clear evidence about how political blowback is affecting Tesla’s global sales. Let’s dig deeper into the numbers to decide what the next five years could have in store for this increasingly embattled American automaker.
First-quarter deliveries were worse than expected
As Musk wraps up his first quarter as a “special government employee” of the Trump administration, Tesla adjusts to a new reality. The company’s vehicles and dealerships are beset by protests, sabotage, and arson attacks in the U.S., while its market share in the European Union declined substantially. Unsurprisingly, these challenges led to a sharp drop in first-quarter deliveries.
The company reported 336,681 vehicle deliveries from January to March, representing a 13% decline from the prior-year period. This result is below even the pessimistic analysts’ forecasts of between 360,000 and 370,000.
While Tesla doesn’t break down its deliveries by geographic region, much of this decline likely comes from the E.U., where The Associated Press reports Tesla sales dropped 49%, even as the wider industry grew.
On the bright side, this figure implies that Tesla’s business held up much better in other parts of the world, revealing how unimportant the European auto market might be for the company relative to the U.S. and China. Despite having 449 million people, E.U. consumer spending is only 58% of the U.S., leading to a potentially smaller opportunity. An influx of Chinese EV makers expanding their manufacturing capacity on the continent could also shrink Tesla’s growth potential and margins.
What is next for Tesla?
In the near term, investors should expect continued weakness for Tesla. Even if consumer demand improves in the coming months, the automaker will still likely report year-over-year declines for the rest of 2025 because of the difficult comps against the prior year. With that said, Tesla’s rate of decline has likely peaked. And several exciting catalysts could cause the company’s top-line growth to resume in 2026 and beyond.
While politics play a role in Tesla’s first-quarter weakness, some analysts believe its aging lineup could also be a contributing factor. Until recently, top-selling vehicles like the Model Y have existed in basically the same form since their launch in 2020. Tesla has finally changed this with its Juniper refresh, which includes exterior design changes, upgraded interior materials, and a slightly better battery range.
Image source: Getty Images.
Some of the first-quarter slowdowns may be due to customers waiting for the updated version of the car. Refreshes for Tesla’s full-size Model S and Model X are expected by the end of 2025, potentially setting the stage for a dramatic rebound in deliveries in 2026.
What could the next five years have in store?
Musk has been in the spotlight this spring, leading the Department of Government Efficiency (DOGE) that is downsizing the U.S. government, attending Cabinet meetings and Oval Office events, and dipping his toe into Wisconsin’s hotly contested state Supreme Court election. While his efforts are controversial and triggered many protests, Musk is expected to leave his government role before June — and that will allow him to return to his many companies and refocus his attention on improving Tesla’s bottom line.
The company’s long-term prospects will depend on its ability to transition away from traditional automotive sales to software-as-a-service (SaaS), artificial intelligence, and robotics. According to McKinsey & Company, self-driving technology could be available in 12% of new passenger cars by 2030 (jumping to 37% in 2035). And Tesla is in a good position to pioneer this industry because of its large fleet of vehicles generating training data, which is then processed by its supercomputer, Dojo.
With the international market looking increasingly volatile, Tesla’s future will depend on its ability to succeed in the U.S. While the Trump administration’s 25% tariff on imported cars and auto parts will introduce uncertainty into the market, Tesla looks well suited to navigate these challenges because all its U.S. cars are assembled in factories in Texas and California (despite the use of some foreign parts).
That said, with a forward price-to-earnings (P/E) multiple of 101, Tesla’s stock still looks too expensive, considering its massive near-term challenges. Long-term investors may want to wait for a better entry point before taking a position in the stock.