Tesla's EU Sales Plunge 45% Amidst Market Growth

Tesla, the electric vehicle giant, faced a significant setback in the first quarter of 2025, with its new car sales in the European Union plummeting by 45% year-over-year to 36,167 units. This decline is particularly noteworthy given that the overall registration of pure electric vehicles in the EU increased by 23.9% during the same period. The data, released by the European Automobile Manufacturers' Association, underscored the stark contrast between Tesla's performance and the broader market trends, which saw a 17.1% increase in pure electric vehicle registrations, a 23.9% increase in hybrid vehicles, and a 12.4% increase in plug-in hybrid vehicles.

Elon Musk, Tesla's CEO, recently announced that he would significantly reduce his involvement with the government's efficiency department to focus more on Tesla. This decision comes at a critical time for the company, which has been grappling with financial performance and market position concerns. In response, U.S. President Donald Trump praised Musk's contributions to the nation, stating that Musk had helped save the country a significant amount of money. Trump also indicated that he would discuss the matter further with Musk, acknowledging that it was time for Musk to concentrate on his business.

The financial report released by Tesla on April 22, 2025, revealed a 9.2% year-over-year decrease in first-quarter revenue to $19.3 billion, falling short of market expectations. The company's net income under GAAP standards also dropped by 71% to $4 billion, further disappointing analysts. The report highlighted that without the company's cash and investment interest income of $4 billion and the $5.95 billion earned from selling emission credits to other manufacturers, Tesla's financial performance would have been even more dismal.

Analysts have expressed concerns about Tesla's growth prospects and high valuation in light of the financial report. Morgan Stanley, however, maintained a "buy" rating for Tesla, setting a target price of $410. The firm noted that despite challenges in core automotive profitability and supply chain risks due to tariffs, Musk's renewed focus on Tesla, particularly in areas like autonomous driving and robotics, could satisfy loyal investors. Morgan Stanley advised investors to remain patient, anticipating that the benefits of autonomous driving technology would eventually translate into revenue and cash flow.

Musk's decision to reduce his government involvement was met with support from Trump, who acknowledged the need for Musk to focus on his business. Trump praised Musk's efforts in helping the government save money and indicated that he would discuss the matter further with Musk. The White House had previously stated that Musk's role as a "special government employee" limited his service to 130 days within a year, suggesting that his term would end by the end of July 2025.

Musk also addressed concerns about tariffs, stating that Tesla had the capability to handle any decisions made by the U.S. government. He emphasized that while tariffs could be challenging for companies with low profit margins, the final decision on tariffs rested with the U.S. president. Musk expressed support for reducing tariffs and continued to advocate for their reduction. He attributed the decline in Tesla's sales to broader economic weakness and consumer uncertainty, asserting that without these macroeconomic issues, there would be no decrease in demand for Tesla's products. Despite the recent financial setbacks, Musk remained optimistic about Tesla's long-term prospects.