What Happened?
Shares of electric vehicle pioneer Tesla (NASDAQ: TSLA) fell 7.1% in the morning session after the Trump administration's new tariffs (25% on Canadian goods and 10% on Chinese products) shook markets.
While similar tariffs were set for Mexico, they have been delayed. But it doesn't help that Canada has already hit back with its levies on U.S. imports. Also, Canada's Former Finance Minister Chrystia Freeland, who is campaigning to replace prime minister Justin Trudeau), called for a 100% tariff on Tesla. President Trump noted in a social media post that Americans might feel the sting: "WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!)." The tariffs were imposed as part of measures to improve the U.S.'s trade gap with the rest of the world and also to tighten border security.
The auto industry stands in the crosshairs. Notably, Tesla builds some of its cars with parts from Canada and Mexico. Tariffs could drive up costs, making cars more expensive from the factory to the dealership.
Separately, there are reports Tesla is losing ground in Sweden and Norway. According to Reuters, registration numbers for Teslas in Sweden fell 44% in January 2025, while in Norway, they dropped 38% compared to the previous year.
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What The Market Is Telling Us
Tesla’s shares are extremely volatile and have had 110 moves greater than 2.5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 5 days ago when the stock gained 6.5%. As is usually the case, the quarter had something for the bulls and something for the bears.
On the bullish side, the company reiterated its promise to investors to launch its unsupervised full self-driving (FSD) and Robotaxi businesses later this year. Aside from the short-term results, those excited about the stock continue to argue that quarterly results are less relevant for a company that will revolutionize areas such as energy and humanoid robots.
For the bears, the results themselves provided fodder. Revenue and operating income both fell short of Wall Street's estimates. These misses were driven by underperformance in its Automotive and Energy segments, as Services (which includes full self-driving) actually beat analysts' revenue expectations. However, Services is Tesla's lowest margin business line - it had an extremely bad gross margin of 5.8% for the trailing 12 months, and it fell to 4.2% this quarter.
Overall, this is a mixed quarter, and despite these challenges, the market seems to be holding faith in Tesla's long-term vision thus far.
Tesla is up 0.2% since the beginning of the year, but at $380.04 per share, it is still trading 20.8% below its 52-week high of $479.86 from December 2024. Investors who bought $1,000 worth of Tesla’s shares 5 years ago would now be looking at an investment worth $7,308.
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