Tesla's Market Slide: Five-Day Stock Dip Amid European Sales Slump and FSD Launch Challenges

In recent days, Tesla's stock has seen a significant downturn, dropping 3.96% on February 26th and marking a five-day losing streak with a cumulative decline of 19.35%. The intra-day low set a new record since November 2024. On February 25th, Tesla's shares experienced an 8.39% decline to close at $302.8, resulting in a market cap reduction to $892 billion, and breaking the trillion-dollar mark for the first time since November 7th last year.

The drop in European sales has been a particular spotlight, with Tesla's January numbers in the European market plummeting by 45% year-over-year. In contrast, the overall sales of electric vehicles in Europe grew, with competition from Chinese automakers intensifying the pressure on Tesla. This decline has shed light on Tesla’s challenges concerning product competitiveness and brand perception on the continent.

Additionally, Tesla announced the acquisition of assets from the bankrupt German high-tech component manufacturer Manz AG. This move signifies Tesla's deeper involvement in the German market amidst the broader sales struggle in Europe. Furthermore, Tesla's unveiling of the Full-Self Driving (FSD) feature to Chinese consumers marks a strategic initiative to penetrate the market despite facing challenges regarding local road complexity and high pricing.

The FSD update, launched February 25th in China, includes city road Autopilot functionalities such as enhanced navigation and traffic signal recognition. However, it still demands driver attention due to the lack of a complete "car to car" coverage present in its U.S. counterpart. This rollout represents Tesla's dedication to integrating more intelligent driving solutions, albeit under scrutiny over the system’s performance in complex traffic scenarios compared to domestic intelligent driving options.

The introduction of FSD in China comes with a steep price tag of approximately ¥64,000, combined with hardware requirements which may further limit its appeal. Criticism arises over the FSD's capability and the cost efficiency against competitors like Huawei and Xiaopeng, both promoting high practicality and reasonable pricing within the Chinese market.

Nonetheless, FSD’s introduction has escalated the technological advancement in the intelligent driving sector, challenging domestic brands to accelerate their innovation. While Tesla's intelligent driving ambitions face hurdles, including adaptation to local driving conditions and competition, the company is striving to overcome its decreasing vehicle sales and revenues, which have been significantly affected globally.

Tesla's revenue in Q4 2024 dropped by 8%, while operating profits nosedived by 23%, primarily due to the continuous decline in average selling prices of key models. Over the year, global deliveries dipped slightly, marking the first decrease in 10 years, and signaling a need for the company to find new growth drivers. FSD’s roll-out is a key part of this strategy, though it remains uncertain if it can fulfill Tesla’s and Elon Musk’s ambitious market expectations in China and beyond.