Tesla's Slipping Sales and Soaring Risks: Why the Stock Could Drop 60%

Tesla's (NASDAQ:TSLA) stock has long been a lightning rod for debate, but recent data is painting a stark picture of a company in trouble. Wells Fargo's bearish forecast—predicting a 63% drop from mid-2025 levels to $120—suggests Tesla's core automotive business is unraveling under the weight of declining deliveries, margin erosion, and escalating competitive and geopolitical pressures. Let's dissect why the bulls are running out of arguments.

Global Deliveries Are Crumbling

Tesla's Q2 2025 performance is shaping up to be its worst in years. May deliveries fell 23% year-over-year (y/y), while Q2 quarter-to-date (QTD) deliveries are down 21% y/y. The declines are universal:

• North America: Deliveries dropped 13% QTD y/y, driven by weakening EV demand and rising competition. Musk's high-profile political activities—like his recent endorsement of Donald Trump's 2024 election efforts—have also soured brand perception among some buyers.
• Europe: The most glaring weakness. QTD deliveries are down 42% y/y, with 10 of 11 major markets showing double-digit declines. France, Portugal, and Sweden saw May deliveries plunge over 50% y/y.
• China: Tesla's second-largest market is now a battleground. Deliveries are down 22% QTD y/y as local rivals like BYD and Chery undercut Tesla on price. BYD's Model Y clone, the Yuan Plus, is selling for $6,000 less than Tesla's base Model Y—without sacrificing range.

Margins Are Getting Crushed by Hidden Price Cuts

Tesla's pricing strategy is a textbook case of “discounting without admitting it.” While sticker prices have stayed flat, the company has ramped up financing incentives—essentially offering free loans or reduced monthly payments—to boost sales. Wells Fargo estimates these promotions are eroding margins, with Q2 leverage already strained.

The math is simple: Tesla can't grow deliveries and maintain margins in this environment. The firm's EPS for 2025 is now projected to fall 25% y/y, a stark reversal from earlier hopes of growth.

New Initiatives? More Like Distractions

Tesla's recent moves—like its June 12 robotaxi launch in Austin—have been framed as “game-changers,” but Wells Fargo sees them as minor blips. The Austin pilot is unlikely to offset weak auto sales or justify Tesla's sky-high valuation. Meanwhile, delays in launching the “Model 2.5” affordable EV risk further cannibalizing existing models.

The real problem? Tesla's once-legendary innovation engine is sputtering. Autopilot's regulatory hurdles, delays in Dojo and Optimus, and the lack of a clear path to “full self-driving” (FSD) mean the company's tech tailwinds are fading fast.

Political and Geopolitical Risks Are Heating Up

Musk's public spats with Trump—and his recent resignation as a “special government employee” at the DOGE (Department of Government Efficiency)—highlight the growing political risks. The reinstatement of U.S. tariffs under Trump's administration threatens Tesla's supply chain costs, while Musk's polarizing stance on issues like immigration and China trade could amplify regulatory scrutiny.

Valuation: A 96x P/E for a Company in Reverse

Tesla trades at 96x forward P/E, versus an average of 25x for peers like Rivian, Lucid, and BYD. Meanwhile, its 2025 EPS growth of just 3% lags peers' 15% average. This disconnect is unsustainable.

The math is brutal: Even if Tesla's valuation contracts to 30x P/E (still high by industry standards), the stock would drop to $135—closer to Wells Fargo's $120 target. Factor in falling deliveries and margin pressure, and the downside only widens.

Investment Takeaway: Time to Bail or Double Down?

Wells Fargo's 63% downside forecast isn't just about near-term headwinds—it's a verdict on Tesla's long-term moat. The company's core auto business is losing market share, its pricing power is evaporating, and its once-revolutionary tech is now a regulatory liability.

Investors should consider:
1. Shorting Tesla if they believe the delivery slump and margin erosion persist.
2. Shifting funds to EV peers like BYD (which is already out-executing Tesla in China and Europe) or Lucid (which has stronger balance sheet metrics).
3. Avoiding Tesla's stock until its valuation aligns with fundamentals—or it proves it can reverse the sales decline.

Tesla's story has always been a bet on Musk's vision. But when the vision can't deliver cars, margins, or regulatory clarity, the stock becomes a high-risk gamble. The bulls may cling to the hope of a “FSD breakthrough” or a Musk miracle, but the numbers tell a different story.

In 2025, Tesla's struggles are no longer a temporary hiccup. They're a sign of a company losing its grip on the EV market. Investors would be wise to take Wells Fargo's warning seriously—and look elsewhere for growth.