On Monday, Tesla's stock experienced a significant dip of about 5%, closing at $383.68, following the announcement of new tariffs by former President Donald Trump on goods from Canada, Mexico, and China. The automotive giant also faced declining vehicle registrations in key European markets such as France, Sweden, and Norway. This downturn was more pronounced than that of its megacap tech peers, with Apple’s stock dropping by over 3%. Despite Tesla's global manufacturing footprint, CFO Vaibhav Taneja warned during an earnings call that tariffs could impact profitability. Additionally, Tesla has adjusted lease prices for certain models and faced challenges with its Cybertruck sales.

The recent decline in Tesla's stock can be attributed to several factors. First, the imposition of tariffs on imports from major trading partners has introduced uncertainty into the supply chain. Tesla, which operates factories in the U.S., Berlin, and Shanghai, has tried to localize its supply chain but remains dependent on global parts. This reliance makes the company susceptible to tariff impacts. Furthermore, Tesla's vehicle registrations in Europe have seen a sharp drop. In France, registrations plummeted by 63% in January compared to the previous year, while in Sweden and Norway, they fell by 44% and 38%, respectively. These declines highlight the challenges Tesla faces in maintaining market share in crucial regions.

Beyond the immediate financial implications, Tesla has also made strategic moves to boost sales. Over the weekend, the company reduced lease prices for its base Model 3 sedan and unpainted steel Cybertruck vehicles. However, this strategy may not be enough to counteract the low demand for the Cybertruck. An independent analyst predicted that Tesla would sell only about 21,000 units of the Cybertruck in 2025, citing an exhausted order backlog and excess production. By the end of 2024, Tesla had 10,600 unsold Cybertrucks due to overproduction and weak demand.

Tesla CEO Elon Musk's political activities have further complicated the company's position. Musk contributed significantly to Republican candidates and causes in 2024, backing Trump's presidential bid with substantial financial support. He also endorsed Germany's far-right Alternative for Germany (AfD) party. Musk’s controversial statements and political engagements have contributed to a decline in Tesla’s brand value, which fell by 26% in 2024 according to Brand Finance. These factors collectively underscore the multifaceted challenges Tesla must navigate in both the market and public perception.

The confluence of tariff pressures, declining European sales, and internal adjustments presents a complex landscape for Tesla. While the company has taken steps to address these issues, including adjusting lease prices and attempting to manage production levels, the long-term impact remains uncertain. The broader market's reaction highlights the delicate balance Tesla must strike between operational efficiency and external economic and political factors.