How the wheels are coming off at Tesla: Sales are flagging, shares are tumbling and analysts say the image is ‘bleak’. Now City specialists reveal if that is time to purchase in… or get your money out earlier than it is too late

In mid-December, Tesla boss Elon Musk was worth $486bn. Now the wealth of this controversial chief executive who is also President Donald Trump’s ‘first buddy’ and the co-head of the new US Department of Government Efficiency (Doge), has shrunk to a mere $384bn (£304.4bn), although he is still the world’s richest man.

To blame is this year’s 12pc fall in Tesla’s share price to $356 (£282.20).

Now investors ask: are the wheels coming off at Tesla, the world’s number one in electric vehicles (EVs)?

If Musk is anxious, he’s not showing it. He seems to be demonstrating that Tesla and his other businesses are still his priority, while also trying to save $2trillion (£1.6trillion) for the US government.

This week he signalled his aim to win the artificial intelligence (AI) arms race by launching a near-$100bn bid for OpenAI, in an approach made via his own enterprise – xAI. OpenAI is the creator of the generative AI system ChatGPT.

But disquiet is mounting over what analysts are calling the ‘dissonance’ between Tesla’s flagging sales and the level of its shares. Despite the tumble in recent weeks, the shares are still well above their level at the time of the US election last November.

Paul Surguy, head of investment management at wealth manager Kingswood, says this reflects the hope that Musk is poised to dazzle thanks to his links with Trump. But, awkwardly, Tesla cars have lost something of their va-va-voom.

Mamta Valechha of Quilter Cheviot says: ‘Results for the fourth quarter of 2024 painted a bleak picture for its core automotive business: sales and profit margins were lower. There was no firm timeline for deliveries of the affordable car.’

During the quarter, Tesla sold 495,570 vehicles, fewer than the 512,277 forecast by analysts and below the 515,000 considered necessary to demonstrate the desirable pace of growth.

Investors are particularly concerned about China – Tesla’s second largest market after the US. Last month, sales of Tesla models were 11.5pc down year-on-year, while sales by the Chinese EV giant BYD soared by 47pc.

Europeans also seem less enamoured with Tesla. In January sales in Germany slumped by 59pc, even as the EV market there expanded. Formerly, Tesla controlled 14pc of the German market; this has dwindled to 4pc.

Germans are unimpressed by Musk’s comments on their politics, viewing this as interference.

Musk is downplaying these setbacks, promising that this year there will be a prototype of its humanoid robot Optimus, aka the TeslaBot, a ‘general purpose, bi-pedal, humanoid robot capable of performing tasks that are unsafe, repetitive or boring,’ according to its bio on X.

Musk vowed to start production in 2026 of autonomous cybercabs. With characteristic bravura he said: ‘We’re setting up for an epic 2026 and a ridiculous ’27 and ’28.’

For the moment cars account for 90pc of sales and 85pc of gross profits. Critics argue that, on this basis, Tesla shares are overvalued since the company’s price earnings (p/e) ratio is 126.

Most auto stocks have p/e ratio in single digits. The p/e ratio is the most popular way of indicating a stock’s value.

Views have always been sharply divided on Tesla and its controversial boss, with some fund managers viewing faithful followers of the stock as members of a cult.

But the angst over the share price is an alert to all investors, whatever their stance on Musk.

Tesla is a member of the ‘Magnificent Seven’ of tech, with Alphabet, Amazon, Apple, Meta, Microsoft and Nvidia also in the mix.

Shares in all were rocked by the emergence of DeepSeek, a low-cost alternative to ChatGPT.

But while Alphabet and the rest have rallied, Tesla has not. This has heightened the anxiety.

You may not hold Tesla directly. But you may have money in a fund or trust that invests in it. This is what you need to know:

Take a ride, or steer clear? 

Wall Street’s analysts are divided. Roughly half rate Tesla a ‘buy’, while the other half suggest holding or selling the shares, in light of such challenges as Musk’s duties at Doge and the distraction that could be caused by a tussle for control of OpenAI.

Optimism tempered by caution is common. Brokers Stifel reckon Tesla to be a ‘buy’ but this week the firm cut the target price for shares from $492 to $474, citing ‘uncertainty caused by the Trump administration’. Analysts’ average target price is $340.

Tesla is held by FTSE 100 investment trust Scottish Mortgage. Its managers Tom Slater and Lawrence Burns sold about £650m worth of this stake in the fourth quarter of 2024, in the wake of the 62pc rise in the shares during the year.

But they have not fallen out of love with Tesla, pointing to factors including its innovation and first-mover advantage which, make up ‘a potent cocktail’.

They argue that Tesla could produce upwards of 10m cars and trucks a year and command a vast share of the global market.More benefits could flow from the integration of its manufacturing expertise into energy storage.

They say: ‘It’s plain to see the long runway of potential upside for the company.’

It makes sense to sit tight and observe how Musk tackles the sales slowdown and consider buying if Tesla’s shares continue to fall.

Jacob Falkencrone, global head of investment strategy at Saxo, comments: ‘Tesla is not out of the race. The company has several key opportunities to regain momentum. The arrival of a car costing less than $30,000 by the middle of this year could significantly boost demand in price-sensitive markets.’

He adds: ‘The next six to 12 months will determine whether it reclaims its dominance or falls further behind its fast-moving competitors. Tesla remains a high-risk, high-reward stock.’

Dan Boardman-Weston, chief executive at BRI Wealth Management, says Tesla shares are ‘wildly expensive’ and warns that Musk could be distracted by his position in government – or fall out with Trump.

He adds: ‘Musk may evoke very mixed feelings, but he has proven one of the most successful and visionary entrepreneurs of all time, revolutionising the EV sector and the space industry.

‘For those reasons, I’d be sure to have some exposure to Tesla in my portfolio.’