Oh how quickly things can change! Three months ago, most of us would agree that we were in a very different place, and nowhere more so than at Tesla, who at the time was valued at more than all other car companies in the world combined. Yes, you read that right, as incredible as it may sound. And even after it’s lost close to 50% of its value this year (with the stock trading at around USD 240 as I write this), that still values the company at around USD 800bn, about three times the value of Toyota, or 12 times the valuation of GM or Mercedes-Benz. Perhaps most relevant, it means that Tesla is currently valued eight times higher than BYD, the leading Chinese EV brand that has now surpassed it in number of cars sold.

The first quarter of 2025 was not kind to Tesla. Not only has the stock price imploded, the company has also seen sales dip heavily in several key markets, with a corresponding loss of market share. And nowhere more so than in China, the most important market of them all and of course, the home market of BYD and other Chinese EV’s. During the first quarter of the year, Tesla’s Chinese deliveries were down 13% as compared to 2024, with its EV market share dropping to 7%, down from 12% a year earlier.

Q1 2025 was also the first quarter when BYD delivered more pure EV’s than Tesla (BYD sells plug-in hybrids as well). In 2024, the two companies sold almost exactly as many EV’s at 1.75m each, but this year, BYD is projected to double that number, and given the brand isn’t present at all in the US and so far on a very limited scale in Europe, most of these will be sold in China and across Asia. And yet, even at a stock price of USD 240, Tesla’s valuation is eight times higher than that of BYD.

If it was just to prove that Tesla’s valuation makes no sense, we could probably stop right here. However, there’s a lot more to say and as we’ll see, it only gets worse from here. Tesla has no doubt been instrumental in making EV’s part of today’s car landscape, but I would argue they’ve now fallen so far behind Chinese brands such as BYD that their market share, and thereby stock price, will only keep on falling. I would even say that it’s doubtful whether Tesla will continue to build cars in the coming years, and if that’s even what they aspire to.

To understand why that is, let’s start with the line-up. Models S and X have now been on the market for 13 years, with the Model 3 not too far behind at nine years. That’s an eternity in modern car cycle terms. Their battery packs have seen continuous improvements, but both the exterior and interior have seen nothing more than a quite mild face-lift over the whole period. The Model Y, the best-selling car in the world in 2024 (obviously quite an achievement!), has recently seen a similar cosmetic update, but it’s six years old by now. We’ll never see the Cybertruck in Europe (thank God for that…) just as little as any of us will probably ever see the roadster or the sub-$25.000 car Elon has been promising for years. That means that Tesla has an older model line-up than all the other car brands, the valuation of which it exceeds by up to 12 times.

Next, there’s the quality which was terrible in the early years but has gotten better such as to be more or less ok today. As a comparison however, I was in a Polestar store the other day and checked out the Polestar 4, the SUV coupe without a rear window. Polestar may market themselves as Swedish, but they’re owned by Chinese Geely and all models are these days built in China. Except for a bit of Nordic interior design, it’s therefore a Chinese car. In terms of interior quality however, it’s on another planet compared to not only Tesla, but also to any EV coming out of Germany these days (and even worse, of any ICE car the likes of Audi, BMW and Mercedes have in their current lineup).

Beautiful materials, plush seats, no hard plastics anywhere, lots of space and all the features you could wish for. Everything is solid and well put together and as I’m lead to believe, Polestar is hereby not the exception, but rather quite representative of modern Chinese EV’s. They even drive well, in the not very passionate but comfortable way EV’s do. Given Tesla’s European charging network is now open to other brands as well, if I were in the market for an EV, I wouldn’t hesitate a second between a Polestar 4 and a Tesla Model S. I’d actually be prepared to pay a premium for the former, but I wouldn’t have to, given it’s 20% cheaper.

Then there’s the whole self-driving thing. Basically since the first Model S came out, buyers have been given the option to add thousands of dollars to the price by opting for self-driving packages that were set to become reality “soon”. Well, in over 10 years, “soon” hasn’t happened yet, which makes you think that at least in Europe, some kind of consumer protection body should step in. How can you be allowed to sell options for functions that never become reality? And for each passing day, Connectivity Day is becoming less likely to happen, quite simply because Tesla’s technology isn’t even close to where it needs to be.

If you’ve been to Austin, San Francisco or a few other American cities in the last years, you will have seen or perhaps been in a Waymo driverless taxi. Based on the Jaguar I-Pace, they transport people around the cities like a normal taxi without any issues. Given they’ve been doing so for some years now, it makes you wonder why they haven’t spread to more places, which may have something to do with their price tag of over USD 250.000 per car. The price is explained by the fact that a Waymo is equipped with not only cameras, but also a radar system and Lidar (Light Detection and Ranging), all necessary for self-driving.

Tesla doesn’t have that. In fact, Tesla is the only brand promoting self-driving on a large scale which relies completely on cameras. That’s of course because it’s a cheaper technology, but it brings the slight disadvantage that cameras struggle to see some things that a radar or Lidar system pick up. Driving in the dark is one of those things you would need to be really stu…. brave to do in a self-driving Tesla. Youtube also has illustrations of someone putting up a picture looking like the continuation of the road at some distance in front of a self-driving car. The Waymos and other radar cars all pick up that it’s not the continuation of the road, and stop. Teslas just run through the picture. Trust me, with the current system and without major developments, no Tesla will ever be fully self-driving, whatever the regulation says, and whatever was promised at the time.

You’ll notice that at no point so far, I’ve mentioned Elon Musk’s politics. Doing so doesn’t improve things. This is not a political blog, so let’s just say that the position he’s assumed in the new US administration doesn’t sit well with his cult-like following, who now start putting stickers on their cars like the one below. No doubt this has also contributed to the falling sales numbers, as apparently, if you buy a Tesla, it’s important that the CEO shares your political positions. I guess I should call BMW then, to make sure the current CEO Oliver Zipse shares my beliefs?

More seriously, the problem is of course that if your sales were based on cult-like, non rational behaviour and the cult then disappears, you’re in trouble. In the case of Tesla, what remains is a heavily top-run business where the guy at the top is no longer fully committed to the company. At this point in time, given all the other issues the company is confronted with, that’s not a very good sign.

You’ll also notice than when Elon talks about his companies these days, it’s usually not so much about the cars as it is about AI robots, energy storing and space travel. Given the man is obviously quite talented and probably not as crazy as his once followers believe, I have no doubt he’s very aware of everything I’ve written above, but doesn’t really care, as he may see Tesla’s future elsewhere than in the car business. The problem however, is that no one outside of his head has an idea of what that business is, and thus how to value it.

Coming back to what we can measure, Tesla is a car company on a slippery slope that is likely to continue downwards. EV’s will not take over the world anytime soon but China will most probably take over most of the EV market, such is on one hand the quality of what they build and on the other the size of their domestic market, where various kinds of incentives go towards promoting EV’s.

Tesla’s home market is far smaller, and the wind has turned against it. They may get some protection from tariffs, but they don’t solve the fundamental issues of the company. And Elon would do well to remember the 70’s, when the US tried to protect Detroit from superior Japanese cars by imposing tariffs. It made Japanese cars more expensive but Americans still bought them, because they were better.

Then again, none of this matters if Tesla’s future isn’t in the car business. I don’t have more of an idea than anyone else of what goes on inside Elon’s head, but I’d say it’s more likely that Tesla focuses on other things than cars, rather than that they turn the numbers around and bring a new model line-up to market in the coming years.

Whatever the scenario, it remains that Tesla is hopelessly overvalued as a car company and the brand’s cult-like followers are now to a large extent gone. And if you’re in the market for an EV, you’d do well to look at a few options before signing a check for the 13-year old Model S. The Chinese are coming big time, and it will be interesting to see how things evolve in the coming years!