Wild swings within the price of Tesla (NASDAQ: TSLA) inventory has lengthy been the rule, not the exception. The five-year share price chart resembles a snapshot of the Rocky Mountains, with towering peaks and deep valleys.

Up to now in 2025, Tesla shares are down 39%. But they jumped 7.6% yesterday (12 March), and are nonetheless up almost 600% over 5 years!

Listed below are three causes the inventory has slumped this yr.

Falling gross sales

Essentially the most elementary cause for the decline is that gross sales of Tesla’s electrical autos (EVs) have been falling. Automotive income within the last quarter of 2024 was down 8% yr on yr to $19.8bn. Complete income was $25.7bn, up 2% from the earlier yr however beneath analysts’ expectations of $27.1bn. ​Working revenue fell 23% to $1.6bn.

On 2 April, Tesla will report international gross sales for the primary quarter. They won’t be fairly. In line with the European Car Producers’ Affiliation, gross sales in Europe had been down 45% in January in comparison with the identical month final yr. Gross sales have reportedly fallen in China and Australia too, although they had been up within the UK and Eire. 

Beforehand, Wall Avenue was anticipating over 400,000 deliveries within the quarter, however now some estimates see the determine falling beneath the 387,000 models from a yr in the past. For all of 2025, Wall Avenue at present tasks gross sales of about 2m EVs, up from 1.8m in 2024. That’s effectively beneath CEO Elon Musk’s earlier promise of 20-30% progress in full-year automobile gross sales.

Valuation disconnect

On paper, Tesla inventory seems grossly overvalued. Even after dropping almost half its worth since mid-December, it’s buying and selling on a price-to-earnings ratio of 121. The price-to-sales a number of’s nonetheless 8.9, regardless of sluggish top-line progress.

If Tesla is solely a automotive firm, then the valuation is disconnected from actuality. Even Musk echoed this again in July, saying traders ought to promote their shares in the event that they didn’t consider Tesla would “solve vehicle autonomy”.

Will it resolve this? We would discover out quickly, as Musk’s promised to launch paid robotaxi rides in Austin, Texas, by June.

In fact, he’s been saying that full self-driving vehicles had been simply spherical the subsequent bend since 2016. Nonetheless, the agency’s beneath huge stress to lastly ship these now, whereas Austin has few rules stopping them from occurring (not like California).

The stakes are excessive. Beforehand, the agency has blamed prospects for accidents involving its driver-assistance methods. However with robotaxis, Tesla might presumably be liable if something goes mistaken.

Whereas the potential long-term rewards for a profitable robotaxi community are enormous, there are notable dangers.

Musk himself

Lastly, Musk’s vocal backing of President Trump has alienated some present and potential Tesla prospects. On Tuesday (11 March), Trump promised to purchase a brand new Tesla in a TV commercial-style look with Musk outdoors the White Home. That’s regardless of serving presidents not being allowed to drive on public roads. Brazenly aligning the model with Trump, who opposes EV subsidies, appears at finest contradictory.

As at all times, analysts are cut up on the place the inventory might head over the subsequent yr. For instance, JP Morgan sees a 51% plummet to $120, whereas Wedbush Securities reckons it might greater than double to $550.

Because of the excessive valuation and uncertainty, I’ve no plans to speculate.