After a delivery failure, Tesla's stock drops; will Musk quit DOGE?

Tesla car sales have dropped to their lowest level since 2022, while the stock has increased in response to rumors that CEO Elon Musk will step down from his government position

Following the announcement that sales of Tesla's electric vehicles (EVs) had dropped to their lowest level in almost three years, the company's shares opened 5.2 percent lower on April 2.

But they soon caught up, later in the session gaining as much as 4 to 9 percent. Following a Politico report that implied CEO Elon Musk would soon withdraw from his government involvement, the reversal was made.

Track all markets on TradingView Tesla sold 336,681 cars in the first quarter of 2025, which was about 9% fewer than it sold during the same time last year. Since Q2 2022, when the Russian invasion of Ukraine rocked the world markets, Tesla hasn't reported such poor quarterly deliveries.

These numbers come after the previous quarter's poor sales, which caused Tesla's share price to drop 6.1 percent on January 2 after it was revealed that 495,570 deliveries fell short of the 498,000 analysts had predicted.

On the interactive investor platform, Tesla (NASDAQ:TSLA) is among the most popular stocks among retail investors, based on the most recent data. But the Magnificent Seven selloff, which has slowed the stock market and caused the SandP 500 to drop 4 points in the first quarter, has had the biggest impact on its share price. Tesla shares have dropped about 30% so far this year.

The decline appears to have been caused by a backlash against Elon Musk, the CEO of Tesla, who has become more politically active.

Hargreaves Lansdown senior equity analyst Matt Britzman says, "There's no way to sugarcoat it, Tesla's first-quarter delivery numbers are a disappointment." "A decline from the previous year is not shocking, but the magnitude is worse than most people anticipated.

Will Elon Musk abandon his role in the government?

"President Donald Trump has told close confidants that while he is pleased with Musk's work at the newly created Department of Government Efficiency (DOGE), the two have decided that Musk will step back from his role supporting the government," Politico reports, citing three White House insiders who spoke to the publication anonymously.

Politico says that some White House insiders had come to view Musk as a political liability, even though the decision seems to have been made jointly.

Politico claims that Musk will depart DOGE in May or June, when his status as a "special government employee" comes to an end. Even after resigning from his current role, Musk is expected to continue to be present around the White House, according to insiders quoted in the report.

Why are Tesla's sales declining?

One of the many factors affecting Tesla's stock price is the company's core business performance, which is EV sales. This is declining for two reasons.

First of all, Tesla is up against more and more competition, especially in China, which has the biggest EV market in the world. There, local incumbents, especially BYD, are putting pressure on it.

According to the most recent sales data, BYD's deliveries rose 23% year over year in March, and by 19% if its plug-in hybrids are taken out of the equation. Over 416,000 battery electric vehicles were sold during the quarter, a 39 percent increase and far more than Tesla's comparable sales.

In recent years, Tesla has also been hampered by BYD's lower pricing, which has caused its own model prices to decline.

Politics over business is the second factor hurting Tesla's sales.

Musk has become the focus of economic activism because of his strong support for Donald Trump during the previous US presidential election and his subsequent involvement at DOGE.

Disturbed by DOGE's slashing of federal agencies, left-leaning Americans have boycotted Tesla purchases and, in extreme cases, vandalized the vehicles.

Tesla and Musk have also come to represent Europeans who are upset with the Trump administration for allegedly erasing the US's prior position as a security guarantor for Europe.

According to a Reuters analysis of ACEA data released yesterday (1 April), new Tesla sales in France and Sweden declined for the third consecutive month in March, indicating that Europeans are spending less on Teslas as they increase their defense spending.

In the end, politics is reducing demand for Tesla at the same time that competition is reducing its profit margins.

Despite declining sales, is it still wise to purchase Tesla stock?

Britzman expands on this analysis by pointing out that Tesla's factories experienced downtime while it updated its top-selling vehicle, the Model Y, which he says "should be a major hit" and was the top-selling vehicle in China in March.

Additionally, he points to a 160 percent annual growth in energy deployment to 10.4GWh. The high profit margin in this area "should help to balance out the earnings impact of the delivery disappointment" for Tesla.

As of 1 April, Tesla's stock was trading at almost 100 times forward earnings and more than 125 times trailing earnings, making it the most expensive of the Magnificent Seven despite its share price decline this year.

The underlying premise of that valuation is that Tesla will benefit the most from the eventual widespread use of autonomous vehicles, or self-driving cars. Long-term, a few poor quarters of EV deliveries won't hurt Tesla's stock price if that proves to be the case.

If you are thinking about purchasing Tesla stock right now, keep in mind that there will be fierce competition as the market for self-driving cars grows. Since BYD introduced free driver assistance features on the majority of its models in February, the company may be becoming a significant player in the market.

Meanwhile, the price of Tesla stock is high and is probably going to fluctuate a lot in the near future.

"Shares will remain volatile until Musk returns his focus to Tesla," Britzman stated prior to the Politico report. "It's rare to see sentiment toward a company so closely tied to a polarizing White House."

Therefore, Musk's reported impending resignation from his government duties will be welcomed by Tesla bulls.