Elon Musk’s electric vehicle maker, Tesla, has given a bombastic 60% return to investors, but the road to a sustained rally remains questionable in light of falling market share and shifting focus from the company’s money-making business.
According to a Reuters report, Tesla, which once held more than 80% of the US EV market, accounted for 38% of the total EV sales in August, the first time it has fallen below the 40% mark since October 2017.
This can largely be attributed to Tesla’s focus turning to building robotaxis and humanoid robots. While other EV makers are launching new models, Tesla is delaying and cancelling plans for cheaper electric vehicle models.
Its last new model was the Cybertruck pickup that rolled out in 2023. While Tesla has refreshed the Model Y, once the world’s best-selling car, the changes have failed to live up to expectations, and it is on track toward a second year of sales decline, the Reuters report added.
Why is Tesla rising despite soft sales?
Yet, if an investor were to look at Tesla’s one-year return, it is nothing less than phenomenal.
According to Justin Khoo, Senior Market Analyst – APAC, VT Markets, this is because Tesla investors, rather than focusing only on near-term auto margins, which are under pressure from price cuts and fierce competition in the US and China, are paying for Tesla’s longer-term bets in AI, robotics, and energy.
Its full self-driving program, robotaxi ambitions, and fast-growing energy storage business with 30% plus margins are seen as potential high-margin growth engines, said Khoo.
Tesla is currently valued as a growth stock, trading at around 75 times its earnings before interest, taxes, depreciation and amortisation (EBITDA), even though its vehicle sales dropped last year and are likely to drop this year, according to Reuters’ calculations.
Meanwhile, Viram Shah, Founder & CEO, Vested Finance, said that while last year’s optimism around the Cybertruck, a cheaper mass-market model in the pipeline, and Musk’s bigger bets on autonomy and AI can be behind the rally in stock, investors need to understand that soft sales and competition are weighing on it.
“Switch the frame to this year, and the picture changes, as Tesla is down nearly 10% year-to-date after deliveries softened and competition ate into its lead,” said Shah.
The apparent contradiction between a soaring 12-month gain and a pullback this year is really a timing story. Last year, the market was pricing in future growth; this year, it’s weighing execution against those lofty expectations, according to Shah.
Moreover, Elon Musk‘s association with President Donald Trump have also hurt the brand.
Tesla stock outlook
According to Justin Khoo, from September 2025 onward, the paradox is that Tesla may keep losing share in a rapidly expanding global EV market but still grow sales in absolute terms.
For investors, the stock remains highly volatile.
“Upside depends on flawless execution of new models and progress in autonomy, while risks include further margin erosion and Chinese competition. The best positioning is to hold existing shares, trim if overweight, and add only on pullbacks or when new catalysts such as the affordable model launch materialise,” Khoo advised.
Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.