What Happened?
Shares of electric vehicle pioneer Tesla (NASDAQ:TSLA) fell 5.2% in the afternoon session after Chinese electric vehicle manufacturer, BYD, unveiled "DiPilot," an assisted driving system (like a smart co-pilot or an extra pair of eyes while driving) that will integrate AI features from DeepSeek (Chinese AI Startup). This move could be seen as a strategic challenge to Tesla, whose Full Self-Driving (FSD) software has yet to receive approval in China. The timing of the announcement is also likely to raise more concerns about Tesla's competitive strengths following reports of weaker sales in China since the start of the year.
Wall Street also wonders if Elon Musk is staying "locked in" following his interaction with OpenAI CEO Sam Altman on social media platform X (formerly Twitter) regarding the potential acquisition of the ChatGPT company. Oppenheimer analysts noted, "While TSLA has shifted focus to being a Physical AI play, we view Elon Musk's bid for OpenAI as a distraction from TSLA's challenges."
Adding to Tesla's concerns, the recent 25% tariff announced by the Trump administration on steel and aluminum imports to the US could pose supply chain challenges. While the direct impact on Tesla remains hard to quantify, investors may worry about rising production costs, as these materials are critical for manufacturing Tesla vehicles.
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What The Market Is Telling Us
Tesla’s shares are extremely volatile and have had 113 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 4 days ago when the stock dropped 3.3% as reports revealed that the company's sales in China fell 11.5% year on year in January 2025, despite incentivizing consumers to boost demand. Data from the China Passenger Car Association revealed that deliveries of Tesla's Model 3 and Model Y vehicles in China fell 32.6% from December 2024. The data further revealed that Chinese competitor BYD recorded a 47% sales growth during the period, stoking fears that Tesla is losing ground in the world's biggest auto market.
Tesla is down 12.3% since the beginning of the year, and at $332.68 per share, it is trading 30.7% 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 $6,445.
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