Tesla's Stock Plunges 2.18% as Credit Revenue Loss Sales Declines Musk Distractions Weigh

Shares of Tesla Inc. (TSLA) fell to their lowest level since September 2025 on Wednesday, with an intraday drop of 2.18%. The decline reflects growing investor concerns over a confluence of regulatory, operational, and strategic challenges that have weighed on the automaker’s stock and financial outlook.

The loss of a critical revenue stream from selling regulatory credits to automakers under U.S. emissions standards has emerged as a key factor. These credits, which offset losses in core vehicle production, generated $10.6 billion since 2019. However, a Republican-led tax and spending bill passed in July 2025 eliminated penalties for automakers failing to meet emissions targets, removing the incentive for competitors to purchase Tesla’s credits. Analysts predict a 75% decline in credit revenue by 2026, with a full phase-out by 2027, exacerbating pressure on Tesla’s profitability as vehicle margins shrink and product lines age.

Declining global sales further amplify the risks. Tesla reported two of its largest quarterly sales drops in history in 2025, with a 13% decline in both Q1 and Q2. The erosion of demand stems from the expiration of a $7,500 federal EV tax credit, intensified competition from Western automakers and Chinese EV rivals like BYD, and reputational damage tied to Elon Musk’s political activities. Consumer protests in key markets have highlighted growing unease over Musk’s public stances, complicating Tesla’s brand positioning.

Musk’s political ambitions have also drawn scrutiny. After backing former President Donald Trump in the 2024 election, Musk announced plans to launch a new political party amid disagreements with Trump’s policies. Analysts warn that his political distractions threaten Tesla’s strategic focus as the company prepares to scale autonomous driving and robotics initiatives. Recent hostile exchanges between Musk and Trump, along with Musk’s public assurances about his commitment to Tesla, have fueled investor skepticism, contributing to a 6.8% stock plunge following related news.

Regulatory challenges in California, a critical market, add to the pressure. Authorities have proposed suspending Tesla’s dealer license for 30 days, citing concerns over its direct-sales model. This could disrupt Tesla’s U.S. operations and force a shift toward a dealership-based approach, potentially diluting its brand identity and profit margins. Meanwhile, delays in scaling robotaxi services—limited to a small group of users in Texas—highlight technical hurdles and safety concerns, raising questions about Tesla’s ability to maintain its first-mover advantage in autonomous driving.

Financial strains are compounding these issues. Tesla’s net income fell 71% in Q1 2025, driven by reduced credit revenue and weaker vehicle sales. With regulatory incentives fading and production costs rising, particularly in China, the company faces mounting pressure to sustain profitability. Its evolving identity as a technology and AI company, rather than a pure-play automaker, has created uncertainty among investors, who remain skeptical about its long-term growth potential across divergent ventures.