TLDR
- Tesla stock dropped nearly 6% following President Trump’s announcement of a 25% tariff on foreign-made vehicles
- Elon Musk warned that Tesla is “NOT unscathed” by tariffs despite domestic manufacturing, as many parts are imported from China
- Tariffs will take effect April 2, the same day Tesla is scheduled to release Q1 delivery numbers
- Analysts expect weak Q1 deliveries between 355,000-360,000 vehicles, below the previous year’s 387,000
- Tesla stock is down approximately 32-36% year-to-date amid ongoing challenges including declining sales
Tesla shares fell nearly 6% yesterday following President Donald Trump’s announcement of a 25% tariff on all foreign-made vehicles. The tariffs have stirred significant concern among automakers and investors alike.
President Trump revealed the plan to implement a 25% tariff on imported automobiles and key car parts. This announcement came as a surprise to Wall Street, which had not anticipated such comprehensive measures.
The new tariffs will go into effect on April 2, with collections beginning April 3. Nearly 40% of all new vehicles sold in the U.S. are imported, suggesting these tariffs will have widespread implications.
Musk’s Response and Tesla’s Position
Despite being a close ally of President Trump, Elon Musk warned that Tesla would face “significant” impacts from the tariffs. He made this statement on his social media platform X shortly after the announcement.
Musk clarified that while Tesla manufactures all its vehicles sold in the U.S. domestically, the company imports many parts. These include electrical components and batteries from China.
“Tesla is NOT unscathed,” Musk wrote, explaining that the tariffs will affect the prices of these imported parts. This runs counter to Trump’s suggestion that the tariffs would be “good for them,” referring to automakers with domestic manufacturing.
Trump noted that Musk did not express his opinion on the policy because “he may have a conflict” of interest with his own vehicle company. This acknowledgment highlights the complex position Musk finds himself in.
Broader Industry Impact
Critics argue that the tariffs on auto imports will drive up manufacturing costs for automakers. This could ultimately increase vehicle prices for American consumers.
The import taxes could also hinder Tesla’s efforts to update its aging fleet. They may similarly impact the company’s ambitions in robotaxi and autonomous driving technologies.
Wedbush analyst Dan Ives described the auto tariffs as a “hurricane-like headwind” to foreign and many U.S. automakers. He estimated they could push average car prices up by $5,000 to $10,000 depending on make, model, and price point.
Ives also noted that adjustments to the tariff policy might still come. The initial announcement may not represent the final form of the policy.
First Quarter Delivery Expectations
Adding to Tesla’s challenges, the company is expected to report weak first-quarter deliveries. These numbers are scheduled for release on April 2, coinciding with the tariff implementation date.
Wall Street was initially expecting about 414,000 vehicle deliveries for Q1. However, the most current estimates have dropped to around 360,000 vehicles.
This represents a decline from the approximately 387,000 cars Tesla delivered in the first quarter of 2024. Analysts suggest some of this weakness is due to the Model Y changeover.
Tesla recently started shipping an updated version of the Model Y. This has caused some potential buyers to delay purchases while waiting for the new model, and production is still ramping up.
Stock Performance and Analyst Outlook
Tesla stock has fallen approximately 32.6% year-to-date according to one report. Another source indicated a decline of about 36% since the January 20 presidential inauguration.
Tesla is also facing challenges from a reported 40% year-over-year decline in European sales for February. This additional pressure has contributed to the stock’s recent poor performance.
Analysts currently maintain a cautious stance on Tesla. On TipRanks, TSLA stock has a Hold consensus rating based on 14 Buys, 11 Holds, and 11 Sell ratings.
The average Tesla price target is $335.32, implying a potential upside of 23.3% from current levels. However, after yesterday’s drop, the stock showed signs of recovery in Thursday’s premarket trading.
Shares of the electric vehicle maker were up 0.7% at $274.05 in premarket trading on Thursday. This came despite S&P 500 futures being down 0.1%, suggesting Tesla might be showing some resilience.
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