Volatility and wild price swings are the name of the game when it comes to Tesla (TSLA). The stock underperformed for much of 2024, but after the November elections in which Tesla was part of the “Trump trade,” shares managed to gain a cool 62% for the year. 

Cut to 2025 and Tesla is the worst-performing constituent of the “Magnificent 7,” and among the top losers in the S&P 500 Index ($SPX) based on YTD price action. In this article, we’ll discuss why Tesla stock is crashing, and importantly, whether it would be prudent to buy the dip now.

4 Reasons Tesla Stock Is Crashing

• Elon Musk’s Polarizing Politics: Tesla CEO Elon Musk has always been a polarizing personality, even though he has been a net positive for the company, as I noted previously. Now though, there are fears that Musk’s politics — especially his association with the Department of Government Efficiency (DOGE) — will harm Tesla’s brand and sales.
• Musk’s Competing Priorities: On a related note, there are concerns over Musk spending enough time at Tesla given his other commitments, including with DOGE. A simple look at his X (formerly Twitter) timeline shows that the billionaire has mostly been tweeting about politics with a few retweets about Tesla squeezed in. While that may or may not tell the whole story, concerns over Musk spending adequate time at Tesla are not unfounded.
• Tesla’s Sales Crash in Europe: Tesla’s global sales fell last year, and while Musk predicted during the Q3 2024 earnings call that the company’s sales would rise by up to 30% in 2025, it is looking increasingly difficult now. Tesla car registrations in Europe fell by almost half in January, and while the fall can be somewhat attributed to the Model Y refresh and customers delaying purchases in order to get the refreshed model, the numbers are not looking good for the company so far.
• Autopilot Response in China: This week, Tesla updated its autonomous driving software in China after a long wait. Reuters however reported that Chinese consumers are not quite thrilled by the update. On a related note, China’s BYD (BYDDY) – a company Musk once dismissed could even be a competitor to Tesla – is offering self-driving features for free in China. There is already an electric vehicle price war in China and the last thing Tesla needs is an autonomous driving price war in its biggest market outside the U.S.

Should You Buy the Dip in Tesla Stock?

Tesla’s near-term outlook is not looking too great and there are not many positive catalysts for the company. Broader market weakness, Musk’s politics, and Tesla’s steep valuations could continue to put pressure on TSLA stock. We’ll next hear from Tesla in early April when the company releases its Q1 delivery data. Analysts expect the U.S. EV giant to report a sharp fall in deliveries for the quarter. Next will be its Q1 earnings release later in the month, and while brokerages are modeling a 60% year-over-year rise in profits, the estimates might turn out to be too aggressive if sales growth sags.

In June, Tesla plans to launch its robotaxi fleet in Austin, which will be another closely watched event given how crucial the product is to the Tesla story. Tesla has several long-term growth opportunities, such as its Optimus humanoid robot, which Musk sees as a multitrillion-dollar revenue opportunity. The company has also successfully navigated the current slump in EV demand, even as many EV startups have gone bust over the last two years.

All said, I expect some weakness in Tesla stock in the near term and would therefore not be a buyer at these prices. Instead, I would wait for better prices to add to my existing Tesla position.