Tesla (TSLA +1.51%) hit a record high of $480 per share in December after Donald Trump won the presidential election. The market assumed the relationship between CEO Elon Musk and President Donald Trump would benefit the company in some way, but that benefit has yet to materialize.
Instead, Tesla stock tumbled more than 50% from its record high in early March, something that has happened only three times before. Shares have since rebounded slightly but remain 45% below their high. Fortunately, history says Tesla will eventually recoup its losses.
NASDAQ: TSLA
Key Data Points
History says Tesla stock will eventually rocket higher and recoup its losses
As mentioned, Tesla stock has declined at least 50% from a record four times since the company went public in June 2010. We can review the first three incidents to make an educated guess about how the current one might play out. Here's what happened the last three times:
- 2017: Tesla shares peaked at around $26 in September 2017 before dropping 54% by June 2019. Model 3 manufacturing problems, Model Y production delays, and disappointing financial results drove the decline. Shares reached a new high in December 2019, shortly after the Cybertruck unveiling. A bullish forecast from Ark Invest CEO Cathie Wood also helped. The stock returned 394% during the year following its low in June 2019.
- 2020: Tesla shares peaked at around $61 in February 2020 before falling 60% by March 2020. Whereas the last drawdown was driven by company-specific factors, this one aligned with a sharp decline in the broader stock market as the rapid spread of COVID-19 led to factory closures and supply chain disruptions. The stock reached a new high in June 2020, and it returned 804% during the year following its low in March 2020.
- 2021: Tesla shares peaked at around $410 in November 2021 before falling 73% by December 2022. Supply chain problems and weak demand amid rising interest rates caused the decline, as did the perception that CEO Elon Musk was distracted after purchasing Twitter. Shares hit a new high in December 2024, shortly after Donald Trump was elected president. The stock returned 140% during the year following its low in December 2022.
Here is the big picture: History says Tesla will eventually recoup its losses. The stock not only rebounded from the last three declines exceeding 50% but also returned an average of 446% during the 12 months following the bottom of those declines. Of course, it is impossible to know whether the current decline has reached the bottom, but that information is still encouraging for shareholders.
However, there is some bad news. The current decline is essentially a continuation of the last one because the underlying problems were never solved. Instead, the rebound was driven by expectations that Tesla would benefit from the ties between Musk and President Trump. However, the company is still battling weak demand, and Musk is arguably more distracted than ever.
Image source: Getty images.
Tesla needs to restore demand and bring robotaxis to market
Demand for Teslas is deteriorating around the world. The company lost market share across its three major markets in 2024, and the losses have accelerated in 2025. In January, Tesla's market share fell by nearly 7 percentage points in the U.S., 8 percentage points in Europe, and 2 percentage points in China.
One reason for the weakness is increased competition from other automakers, which has been challenging for Tesla due to its aging lineup of electric cars. The company plans to build a more affordable vehicle this year, reportedly called the Model Q, which may help to some degree. However, weak demand is likely also related to Elon Musk's involvement in politics.
Tesla sales declined 49% in Europe during the first two months of 2025 despite strong growth in the broader electric car market. That alarming figure suggests Musk is damaging the brand by alienating potential buyers. The other issue with Musk dedicating so much time to the Department of Government Efficiency (DOGE) is that it raises questions about how actively involved he is with Tesla.
That is worrisome not only because the company is losing market share but also because it plans to launch an autonomous ride-sharing (robotaxi) service in Austin, Texas, this June. Alphabet's Waymo has been providing autonomous rides in several cities for years, so Tesla is already behind the curve. That means the stakes are high, and the launch must go smoothly so that Tesla can begin to catch up.
Importantly, Tesla's full self-driving software is powered entirely by computer vision. That makes its robotaxis less expensive and more scalable than Waymo robotaxis, which use lidar and radar (in addition to cameras) to map streets in high definition. Tesla avoids those costs and the associated time commitment by relying solely on cameras.
So, the company could theoretically launch robotaxis in any city once its full self-driving software supports true autonomy. By comparison, Waymo must meticulously map the metropolitan areas where it operates beforehand. Nevertheless, Tesla faces execution risk. Waymo has a head start, and its robotaxis may be safer because they are equipped with multiple types of sensors.
Here is the bottom line: Tesla shares have fallen by more than 50% three times before. The stock has always generated triple-digit returns during the year after hitting bottom and has always eventually reached a new high. However, for that trend to continue, I think Tesla must deal with demand issues and avoid permanent damage to the brand. The company must also successfully bring robotaxis to market in the near future. The stock may continue falling without those catalysts.
