What happened

Shares of Tesla (NASDAQ:TSLA) were hit hard on Wednesday. The stock fell 4.8% by the time the market closed.

The stock is likely down primarily because of a decline in the overall market that weighed particularly heavily on growth stocks like Tesla. However, shares may also be down because of a note from Morgan Stanley analyst Adam Jonas about Ford's new electric Mustang Mach-E taking market share from Tesla in February.

A chart showing a stock price falling

Image source: Getty Images.

So what

Jonas estimates that Tesla's market share of the EV market in the U.S. dropped from 81% in February of 2020 to 69% in February of 2021, largely due to market share gains from the new Mustang Mach-E.

Still, this doesn't mean Tesla's electric vehicle sales are faring poorly; the overall EV market grew 40% year over year during the period, Jonas estimates. 

The main reason for the stock's decline, however, is likely a pullback in the overall market on Wednesday. The S&P 500 and Nasdaq Composite fell 1.3% and 2.7%, respectively. Many growth stocks like Tesla fell even more.

Now what

Tesla stock's decline adds to an overall downward trend for the stock in recent weeks. After shares rose to an all-time high of $900.40 earlier this year, the stock is now down 7% year to date, underperforming the S&P 500's 2% decline.

Investors should expect more volatility from Tesla shares, as growth stocks are typically much more volatile than the overall market.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.