Is Tesla in structural decline, or is it a once-in-a-lifetime buying opportunity?
In 2023 and 2024, I wrote several blog posts positing that Tesla may be just another car company. A couple of example articles can be found here and here.
The share price of Tesla on the date of those two blog posts was about US$274.00 and US$171.00, respectively. The price of Tesla shares, thanks in no small part to Trump’s election as U.S. President and Elon Musk’s pre-election support, subsequently rallied to over US$400.00 per share, and after a more recent 50 per cent decline, the price as of 7 April 2025 is US$239.43.
I will openly admit the returns from investing in Tesla shares haven’t matched the thesis I presented last year or the year before. But we look at the content of those blog posts, the thesis was right, however it hasn’t mattered. Instead, if we use the share price performance as our sole measure, I was wrong, and some will argue ‘very’ wrong – you could have made a lot of money buying Tesla shares and selling before the recent crash.
In this Tesla blog post I’ll admit to an inability to predict sentiment towards this company’s shares, and so rather than proffer my own views about the company’s prospects, I will present the current bull and bear cases and leave it to you to decide.
The bear case
Once the undisputed king of Electric Vehicles (EVs), some investors suggest Tesla is careening toward its endgame. The company’s most vital market and future source of growth, China, has turned from a goldmine into a quagmire, with sales tumbling a staggering 29 per cent through February 2025. This isn’t just a hiccup – it’s a body blow to Tesla’s profitability, which has leaned heavily on the Shanghai plant since its debut in 2019. That facility, a pioneering venture as the first wholly foreign-owned car factory in China, was a masterstroke at the time, harnessing cheap labour, local parts, and streamlined logistics to fuel a sales boom and push Tesla into the black year after year. But the tide has turned. Armed with sharper technology (that they arguably ‘borrowed’ from Tesla) and rock-bottom prices, Chinese competitors are chipping away at Tesla’s dominance, threatening to squeeze its already thinning profit margins to a razor’s edge. It is claimed China welcomed Tesla to siphon its know-how, and now, led by BYD (Build Your Dreams – a Chinese EV manufacturer), China is outbuilding it with better and cheaper cars.
The trouble doesn’t end in China. Tesla’s stock has taken a brutal beating, plummeting 35 per cent in 2025 alone, a stark reflection of its faltering fortunes. In California, the most supportive and nurturing of Tesla’s many markets, a hostile landscape has emerged, with sales cratering 31 per cent in January alone.
Across the Atlantic, the picture is even bleaker, as European sales nosedived 43 per cent over the year’s first two months. These aren’t just numbers; it’s argued by the bears they signal a profound erosion of a brand that once stood as a beacon of innovation and eco-conscious cool. Rivals are pouncing on Tesla’s vulnerabilities.
China’s BYD, now the world’s revenue leader in EVs after surpassing Tesla in 2024, is poised to claim the crown for global sales volume too. Its arsenal includes dirt-cheap models like the US$10,000 Seagull hatchback and the US$16,000 Yuan Plus SUV – vehicles that undercut Tesla’s premium-priced Model Y (US$34,500) and Model 3 (US$32,000 and up) by a country mile. BYD’s aggressive pricing fuels its expansion into Latin America, Australia, and Europe, even as bans and U.S. tariffs keep it at bay in the United States.
Meanwhile, it’s not just the hardware that is in trouble. Software supremacy also appears to be eroding. BYD recently unveiled a game-changing claimed five-minute battery charging system, leaving Tesla’s Superchargers – once the gold standard – lagging at four times slower.
Elsewhere, Alphabet’s Waymo is pursuing self-driving supremacy, a domain where part-time CEO, Elon Musk, has pinned Tesla’s long-term hopes.
Musk juggles seven enterprises, including his controversial stint as Trump’s DOGE (Department of Government Efficiency) czar, which has stirred a hornet’s nest (the other five companies being: Tesla, SpaceX, X, Neuralink, xAI, and The Boring Company). His push to gut government spending has ignited a fierce backlash – protesters are picketing Tesla stores, and vandals have torched vehicles in outrage. This unrest is poisoning Tesla’s image, especially in progressive California, where its brand equity is fraying fast.
The competition isn’t just catching up – it’s said to be lapping Tesla. BYD’s “God’s Eye” autonomous driving system, soon to be standard on its new models, is a direct shot at Tesla’s US$8,000 Full Self-Driving (FSD) suite, which still requires human oversight despite its bold name. BYD offers three tiers, from a base model rivalling FSD to a high-end version with laser lidar – a feature Tesla stubbornly eschews.
Tied to Deepseek’s rising AI platform, BYD’s “God’s Eye” promises continuous upgrades, with reviewers already calling it “more sophisticated than Tesla’s system might ever be.” And BYD isn’t alone – China’s EV pack, including XPeng, NIO, and battery behemoth CATL, is flexing intellectual property that’s leaving western automakers scrambling to keep up.
Back in the U.S., Tesla’s struggles are stark. While national EV sales spiked 14 per cent in January as buyers rushed to snag a $7,500 tax credit before it vanished under Trump, Tesla’s deliveries slumped 11 per cent, dragged down by California’s collapse. Analysts are sounding the alarm, forecasting a second consecutive year of shrinking deliveries – a near-unprecedented skid for an automaker of Tesla’s stature. The Cybertruck, Musk’s angular brainchild, has flopped spectacularly, moving just 40,000 units in 2024 against his lofty 200,000-unit goal, plagued by recalls and quality woes. With no exciting new models on the horizon, Tesla’s pivot to AI and robotics feels like a so-called ‘Hail Mary’ pass. Yet even here, it’s outclassed – Waymo’s robotaxis are years ahead, and Tesla’s Optimus robot looks clunky next to older creations like Boston Dynamics’ agile machines.
According to the bears, Tesla, once a trailblazer, now teeters on irrelevance, its self-inflicted wounds and relentless rivals threatening to topple it from its perch. The irony is bitter: a company that redefined the automotive future may soon be a relic of its past.
Not everyone agrees. Many instead see the recent troubles as temporary and therefore a buying opportunity.
The bull case
There’s no question that Tesla’s stock has taken a beating in 2025, plummeting nearly 50 per cent from its peak and erasing billions in market value. For some investors and analysts, this sharp decline signals a rare chance to buy into one of the most innovative companies in the world at a discount.
Despite challenges like slumping Model Y sales and Elon Musk’s high-profile distractions, the bullish case for Tesla remains compelling for many. Here’s why some believe now is the time to invest.
The Model Y, the world’s best-selling car in recent years, has seen a significant sales drop in 2025, particularly in Europe. While the bears point to this as evidence of weakening demand, the bulls argue it’s a short-term issue. A key factor is Germany’s decision, for emergency budgetary reasons, to slash EV subsidies to zero, which hit Tesla hard given its strong market presence there. However, this could be a temporary measure – European governments have historically oscillated on green incentives, and a reinstatement of subsidies could reignite sales.
Additionally, Tesla’s transition to a refreshed Model Y has dampened demand for the outgoing model, a common phenomenon in the auto industry during product changeovers. Bulls expect sales to rebound sharply once the new Model Y ramps up production and hits showrooms, leveraging Tesla’s brand strength and global reach.
Elon Musk’s involvement with DOGE under the Trump administration has raised eyebrows, with critics arguing it diverts his focus from Tesla. Yet, bulls counter that Musk has a proven track record of delegating effectively. Tesla’s leadership team – engineers, executives, and innovators – has kept the company humming through past Musk absences, like his time spent on SpaceX or X. His ability to place capable lieutenants in charge means DOGE is unlikely to derail Tesla’s momentum. If anything, Musk’s political influence could ease regulatory hurdles for Tesla’s autonomous ambitions – at least in the US market, turning a perceived negative into a long-term positive.
Tesla’s current price-to-earnings (P/E) ratio sits at an arguably lofty 140 times its reduced 2025 earnings, a figure that screams overvaluation for a traditional automaker. But bulls argue Tesla isn’t just a car company – it’s a technology leader with unparalleled optionality. The real value lies in its advancements in autonomy and robotics, not just its EV sales. Tesla’s FSD technology could be licensed to other manufacturers, creating a high-margin revenue stream akin to software giants like Microsoft or Google. This potential isn’t fully priced in, making the stock’s premium justifiable when viewed through a tech lens rather than an automotive one.
Perhaps the most enticing bullish argument is Tesla’s Optimus humanoid robot. Elon Musk has suggested that Optimus could transform Tesla into a company valued at tens of trillions, and some analysts concur. If Optimus achieves mass production – potentially starting with thousands of units in 2025 and increasing exponentially – it could alleviate labour shortages, revolutionise manufacturing, and permeate households worldwide. Bulls estimate its market opportunity at US$15 trillion or more, far surpassing Tesla’s current valuation. Unlike EVs facing mounting competition, humanoid robotics is an emerging field where Tesla enjoys a first-mover advantage. This untapped potential, they argue, is scarcely reflected in today’s stock price.
Tesla’s push toward autonomy and its other ‘options’ remains a cornerstone of the bullish thesis. The company plans to launch fare-collecting robotaxis in Austin, Texas, by mid-2025, which could prove FSD’s viability and unlock a massive ride-hailing market. It is claimed autonomy could add $1 trillion to Tesla’s valuation, while Cathie Wood’s Ark Invest predicts robotaxis could drive annual revenue to US$1.2 trillion by 2029. Even if these timelines slip (a Musk hallmark), the technology’s progress – combined with a potentially friendlier regulatory environment under Trump – positions Tesla as a leader in a sector where competitors like Waymo are only beginning to crack.
Tesla’s energy storage and generation segment (10 per cent of revenue in 2024) is poised for record deployments in 2025. With global demand for renewable energy solutions surging, this high-margin business could offset automotive weakness.
Meanwhile, FSD’s rollout in China and potential market entries in India and Southeast Asia could tap into vast new customer bases, countering European softness, while Musk’s ties to the Trump administration might not just ease autonomy regulations but also shield Tesla from trade war fallout, given its U.S.-centric production compared to Chinese rivals like BYD.
Tesla’s 50 per cent share price crash in 2025 has spooked many, but for bullish investors, it’s a golden opportunity. The Model Y sales slump is said to be a temporary hurdle, Musk’s DOGE role highlights his delegation skills, and the stock’s high valuation reflects its tech-driven future, not its car-making present. Optimus and autonomy – potentially trillion-dollar businesses – offer explosive upside that’s underappreciated at current levels. Add in energy growth, global expansion, and political advantages, and it’s argued the case for buying Tesla now grows stronger.
For what it’s worth, I would note the subsidy cut in Germany and the model refresh are plausible explanations for sales declines, supported by reports of Tesla’s European struggles in 2025. However, no definitive evidence confirms subsidies will return soon, and competition from BYD and others could prolong the slump.
Tesla’s operational resilience under Musk’s multi-tasking is well-documented, but his political visibility has undeniably sparked consumer backlash, as seen in trade-in data and boycotts. I’d point out that the bullish argument relies on historical precedent rather than current sentiment.
In terms of valuation, Tesla’s premium has long been tied to future tech bets. Licensing FSD is speculative but aligns with analyst models attributing significant value to autonomy.
And while many parrot Musk suggesting Optimus is Tesla’s US$15 trillion figure, it’s far from guaranteed. Production timelines are based on Musk’s January statements, but his track record (where’s the Tesla roadster promised in 2020) suggests caution.
Finally, the Robotaxi plans and FSD leadership are widely touted but delays and safety concerns persist.
Well, there you have it. Hopefully, this will help you decide whether to add Tesla to your portfolio.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
