Tesla’s stock suffered an 8% drop on Tuesday, causing its market value to fall below $1 trillion for the first time since November, after data revealed a sharp decline in the electric car maker’s sales in Europe in January.
The European Automobile Manufacturers Association reported a 45% decrease in Tesla’s sales in Europe, while overall electric vehicle sales in the region saw a 37% increase.
This sales slump highlights the challenges facing Tesla following a drop in global deliveries last year, which has increased pressure on CEO Elon Musk to introduce lower-priced models and advance the development of autonomous vehicles, which he believes are integral to Tesla’s future.
Tesla’s shares fell to $305, bringing the company’s market capitalization to $981 billion, still more than twice the combined value of General Motors, Ford Motor, Volkswagen, Toyota Motor, Hyundai Motor, and BMW.
Some investors are concerned that Musk’s involvement in a significant downsizing of the federal government, at the request of U.S. President Donald Trump, may be diverting his focus from Tesla and potentially harming the company’s brand appeal to certain consumers. Musk also leads privately-held space rocket maker SpaceX, among other private ventures.
“He’s a very hands-on operator, and if you’re spending that much time in an office in the White House, how much time are you spending running all of your other companies, including the one that’s publicly traded?” said Art Hogan, chief market strategist at B. Riley Wealth in Boston.
Concerns regarding potential over-investment in artificial intelligence are also weighing on Tesla, as well as on Microsoft and Meta Platforms ahead of AI chip heavyweight Nvidia’s quarterly report on Wednesday, according to Hogan.
Tesla’s stock is currently trading at 112 times expected earnings, above its five-year average PE of 93. In comparison, Ford’s stock is valued at eight times earnings, while GM’s is at seven.
Supporters of Tesla point to the company’s upcoming launch of a new, more affordable electric vehicle, as well as Musk’s promises to introduce a paid autonomous car service.
Despite Tuesday’s decline, Tesla shares have seen a 51% increase over the past 12 months. However, year-to-date, the stock is down 24%.
(Reporting by Noel Randewich; Editing by Leslie Adler)