May is underway, and Tesla (TSLA) CEO Elon Musk has signaled that he’s gearing up for a significant return to Tesla’s day-to-day operations starting this month. During the Q1 earnings call, Musk announced that he will scale back his involvement with the Department of Government Efficiency (DOGE), promising to make Tesla his top priority once again. Still, analysts warned that Musk’s increased presence alone may not be enough to reverse the lasting reputational damage caused by his controversial political activities and public statements, which have sparked widespread protests, boycotts, and vandalism targeting Tesla showrooms.

For example, Tesla’s struggles in Europe have reached critical levels, with experts calling it a “death spiral” in the company’s European sales. Recent data from key markets such as Germany, the United Kingdom, and Sweden show Tesla’s sales falling dramatically, even as overall European EV sales continue to grow. With Musk vowing to refocus on the automaker, many investors wonder: Can his comeback stem the tide, or is the damage already irreversible?

In this article, we’ll delve into Tesla’s troubling European sales trends, examine how Musk’s polarizing image continues to weigh heavily on the brand, and assess whether his renewed commitment can truly save TSLA stock — or if the “death spiral” is destined to continue.

About Tesla Stock

Tesla (TSLA) is a prominent innovator dedicated to accelerating the global transition to sustainable energy. The Elon Musk-led powerhouse designs, develops, manufactures, leases, and sells high-performance fully electric vehicles, solar energy generation systems, and energy storage products. It also offers maintenance, installation, operation, charging, insurance, financial, and various other services related to its products. In addition, the company is increasingly focusing on products and services centered around AI, robotics, and automation. Its market cap currently stands near $1 trillion.

The EV maker has been under pressure in 2025, with TSLA stock sliding 21% in the year-to-date. Major drivers of this sharp decline include growing political backlash against CEO Elon Musk and intensifying competition in China.

Tesla CEO Elon Musk’s Long-Awaited Return Is Here

When Tesla released its Q1 results in late April, CEO Elon Musk stated he would “significantly” reduce his involvement in DOGE. During the Q1 earnings call, Musk said, “Starting probably next month, May, my time allocation to DOGE will drop significantly... So, I think I’ll continue to spend a day or two per week on government matters…” Musk added that he plans to allocate more of his time to turning Tesla into the world’s most valuable company. Investors viewed that as a major positive for Tesla, sending the stock 5% higher in the following trading session. 

However, it remains unclear how Musk’s “return” will boost the company’s key performance metrics. As I noted in my latest article on TSLA, many analysts have expressed concerns that the brand faces a long road to recovery — or that there may be permanent damage — especially as ongoing political controversy continues to weigh on its image. The strongest evidence for that argument is Tesla’s situation in Europe, where sales have taken a significant hit, so let’s take a closer look.

No End in Sight for Tesla’s European Sales Slump

Musk’s controversial political actions have made Tesla showrooms and charging stations across the U.S. and Europe targets of protests, with some vehicles being shot at and set on fire. Outraged Europeans hung Musk in effigy in Milan. In London, posters appeared urging people to avoid buying “Swasticars” from Musk. On the back of that, Tesla’s sales in Europe have gone into a free fall, “with no end in sight.”

In the first quarter, electric vehicle sales in the European Union rose by 23.9% year-over-year.  Despite this, Tesla’s sales in the region dropped sharply by 45% to only 36,167 units, according to data from the European Automobile Manufacturers’ Association. As a result, Tesla’s market share declined from 2.4% last year to 1.3% in the first quarter of this year. Notably, in the expanded market comprising the European Union, the United Kingdom, and the European Free Trade Association (Iceland, Liechtenstein, Norway, and Switzerland), Tesla’s sales dropped 37.3% year-over-year in the first quarter, while overall EV sales rose by 28%.

The trend persisted into the beginning of the second quarter. In April, Tesla’s sales in Sweden plummeted by 81%, marking the lowest level since October 2022. In the Netherlands, its sales tumbled 73.8%, hitting their lowest April level since 2022, while in Portugal, sales dropped 33%, a steeper drop than the previous month. A similar trend was seen in Denmark and France, where the company’s sales dropped by 67% and 59%, respectively. In addition, data from the U.K.’s Society of Motor Manufacturers and Traders and Germany’s federal motor transport authority showed that Tesla sold 62% fewer cars in the U.K. and 46% fewer in Germany in April.

The April numbers have raised further doubts about whether the rollout of a refreshed Model Y can turn around Tesla’s performance in Europe. The electric crossover has long been Tesla’s top-selling model and a consistent leader on Europe’s sales charts. Car buyers across much of Europe can already place orders for the new Model Y, but Tesla’s websites in Germany, the U.K., France, and Italy show that deliveries are expected to begin in June. With that, it will be a few months before sales data reveals whether the updated version of the car has regained consumer interest. Analysts and industry watchers, however, remain skeptical. For example, Electrifying.com CEO Ginny Buckley stated, “The brand has taken a reputational hit here in Europe,” noting that in a survey of 1,642 people conducted between March 24 and April 11, 59% of respondents said Musk had made them less likely to buy a Tesla.

As I mentioned in one of my previous articles on TSLA, the steep sales declines in Europe could pose a serious issue, given that international markets made up over 50% of the company’s revenue in 2024. Of course, there’s also China, the largest EV market and Tesla’s second-largest after the U.S., but the outlook there is no better, as the company faces intense competitive pressure, especially from BYD (BYDDY).

Musk’s Brand Crisis Weighs Heavily on Tesla’s Q1 Performance

Tesla’s Q1 earnings report underscored that CEO Elon Musk’s close ties to President Donald Trump pose a major challenge for the brand. The EV maker reported total revenue of $19.34 billion for the quarter, down 9.2% year-over-year and falling short of Wall Street’s consensus by $2.07 billion. That’s striking for a company that, until recently, consistently delivered strong year-over-year growth. Still, the weak top-line figure wasn’t entirely unexpected, as much of the softness had already been indicated in Tesla’s earlier Q1 delivery update.

Tesla’s core automotive segment took a major hit. Its automotive revenue declined 20% year-over-year to $13.97 billion, weighed down by lower average selling prices and a steep drop in delivery volumes. The outlook for this segment appears bleak, with Tesla making its annual targets conditional and postponing any update until the second quarter, which is a clear indication of uncertainty. First, there are macroeconomic factors at play, including a recent advance estimate showing the U.S. economy contracted in Q1 and data indicating consumer confidence has fallen to a 5-year low. Next, interest rates in the U.S. are still historically high, making auto loans more costly for consumers. Finally, significant uncertainty remains around U.S. trade policies, though we received some encouraging news on that front last week. All of these factors spell trouble for Tesla’s auto business, as they are prompting consumers to postpone car purchases. On top of that, factor in Tesla’s brand crisis and the growing competition in both China and Europe.

Meanwhile, Tesla’s Energy segment stood out as a bright spot in Q1. The segment’s revenue jumped 67% year-over-year to $2.73 billion, driven by higher deployments of Megapack and Powerwall systems. However, the segment could face headwinds if U.S.-China trade tensions persist, as Tesla relies heavily on China for sourcing LFP batteries. Finally, revenue from the services and other segment grew 15% year-over-year to $2.64 billion. The revenue growth from both segments, however, was too small in absolute terms to offset the weak performance of the automotive business.

In terms of profitability, the situation looked even more troubling. The company’s gross margin contracted by 104 basis points year-over-year to 16.3%, while its operating margin declined even more sharply, dropping to 2.1% from 5.5% a year earlier. Falling revenues and narrowing margins resulted in a sharp 66% year-over-year decline in Tesla’s operating profit to $399 million. With that, TSLA posted adjusted EPS of $0.27, down 40% year-over-year and missing expectations by $0.15.

During the earnings call, Musk continued to highlight autonomy and artificial intelligence as central to Tesla’s future. “Autonomous driving is the next phase of the future of Tesla,” he stated, adding that despite some setbacks, the robotaxi project is still on track. The company aims to roll out the service in Austin next month, with plans for “millions of Teslas operating autonomously in the second half of next year.” Musk also mentioned that Tesla is making “good progress” in developing its Optimus humanoid robot. The company expects to deploy thousands of Optimus robots in its factories by year-end, with Musk forecasting annual production could hit one million units by 2029. In addition, the company confirmed it is moving forward as scheduled with the production of its more affordable models and the Cybercab.

TSLA Valuation and Analysts’ Estimates

According to Wall Street estimates, TSLA is expected to post a 32% year-over-year drop in its EPS to $1.39 for fiscal 2025. Its revenue is projected to remain largely unchanged year-over-year at $98.34 billion.

From a valuation standpoint, Tesla stock does not look attractive at current levels. The stock currently trades at a forward Non-GAAP P/E ratio of 156.03x, which is above the sector median of 15.32x and its 5-year average of 115.07x. With that, the current valuation offers investors very little margin of safety.

What Do Analysts Expect for TSLA Stock?

Wall Street analysts are split on Tesla stock. While 16 analysts rate the stock as a “Strong Buy” and two as a “Moderate Buy,” 13 suggest holding, and 10 give it a “Strong Sell” rating. With that, TSLA stock has a consensus “Hold” rating and trades at a premium to its mean price target of $283.14.

The Bottom Line on TSLA Stock

All things considered, I don’t believe Musk’s return will be enough to save TSLA stock, at least in the near term. It is unclear how Musk’s return will boost the company’s key performance metrics.

 Tesla’s brand has suffered substantial reputational damage on both sides of the Atlantic, with sales in Europe continuing to plunge at the beginning of the second quarter. Multiple analysts pointed out that no matter how many hours Musk spends in the office, it won’t change customers’ perception of the brand in the foreseeable future. With that, the brand faces a long road to recovery, and it remains to be seen whether it can regain customer loyalty.

On the date of publication, Oleksandr Pylypenko did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.