Why Tesla (TSLA) Shares Are Trading Lower Today

What Happened?

Shares of electric vehicle pioneer Tesla (NASDAQ:TSLA) fell 4% in the afternoon session after markets pulled back, with the decline concentrated in the tech space, as investors engaged in profit-taking following a robust week that saw the S&P 500 hit a new record. 

Adding to the pressure, new inflation data, specifically the Core PCE, showed an acceleration in July, signaling that rising prices remain a risk despite being in line with expectations. This confluence of factors, including market highs heading into a historically weak September, led to a pullback, with the Nasdaq Composite shedding 1.15%. While the Federal Reserve has hinted at potential rate cuts, the focus on inflation and the jobs market continues to influence investor sentiment. 

Also, a recent study suggested that consumer demand for the company's Full Self-Driving feature is weaker than believed, raising questions about a key potential growth driver. 

Lastly, new data from the European Automobile Manufacturers Association revealed a 40% year-over-year drop in Tesla's car sales in Europe for July.

The shares closed the day at $334, down 3.4% from previous close.

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What Is The Market Telling Us

Tesla’s shares are extremely volatile and have had 46 moves greater than 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 1 day ago when the stock dropped 1.3% on the news that reports revealed a significant slump in its European sales for July, fueling concerns about increasing competition. The electric vehicle maker's sales in Europe plunged by approximately 40% year-over-year, with various reports showing a drop to around 8,800 vehicles. This decline is particularly concerning as the broader European EV market expanded. Compounding the issue, Chinese rival BYD's sales surged, with its new car registrations outselling Tesla in the region. This consistent loss of ground in major markets is weighing on investor sentiment.

Tesla is down 12.1% since the beginning of the year, and at $333.44 per share, it is trading 30.5% 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 $2,007.

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