Why Tesla Might Be Worth Distancing Yourself From in 2025: A Market Reality Check

Tesla’s Momentum Is Behind It, Despite an Expanding EV Market

The numbers tell a cautionary tale. While the global electric vehicle market surged from 13 million to 17 million units between 2023 and 2024—and U.S. EV sales climbed from 1.2 to 1.3 million—Tesla has stumbled in the opposite direction. The automaker’s trailing 12-month deliveries peaked around 1.8 million units in Q3 2023 and have flatlined or declined ever since, despite aggressive price cuts of 20% in 2023.

This divergence is striking. Tesla isn’t losing ground because the EV market contracted; it’s losing ground because competitors are surging. Chinese manufacturers BYD and Geely have captured commanding market share positions and continue expanding. In Tesla’s home turf, the U.S., the company’s EV market share has collapsed from 80% to just 38% by August 2025—an eight-year low. Globally, Tesla remains the only top EV company posting negative growth: -11% in deliveries between January and August 2025.

This raises a fundamental question: When the industry is growing but a company is shrinking, what does that signal about its moat?

Leadership Credibility and Strategic Focus: A Compounding Risk

Beyond market share erosion, there’s the matter of management focus—something that has long troubled serious investors. The CEO’s brand has become inseparable from partisan politics, creating an unintended cost to the business itself. A 2025 study by the National Bureau of Economic Research estimated that Tesla sales between October 2022 and April 2025 would have been 67-83% higher absent this polarization. That represents 1 to 1.26 million vehicles left on the table.

But the reputation challenge is only part of the leadership problem. Elon Musk’s attention is fractured across multiple ventures: he’s actively involved in seven companies (Tesla, SpaceX, Neuralink, xAI, X.com, The Boring Company, and others), while simultaneously spending months in 2024-2025 running government operations and floating political initiatives.

This diffusion of focus carries real risk. Tesla’s board felt compelled to propose a compensation package worth potentially $1 trillion just to retain the CEO—a tacit admission that the likelihood of his attention wandering away from the automaker is substantial enough to require extreme incentive alignment. While shareholders approved the measure, compensation packages are no guarantee of prioritization.

The tension is unavoidable: how can an investor have confidence in Tesla when the CEO’s own board questions whether his focus will remain on the company?

The Vanishing Competitive Moat

First-mover advantage in EVs meant something five years ago. It means something different today. Tesla’s brand was built on innovation and operational excellence, but innovation requires sustained focus—and operational excellence demands protection from increasingly capable competitors.

Consider the global landscape: BYD’s ascendancy, Geely’s growth trajectory, and a dozen other Chinese manufacturers are aggressively taking share. In markets where Tesla once dominated, it now scrambles. The company isn’t weathering temporary headwinds; it’s experiencing structural displacement.

When an industry grows 30% year-over-year but a company shrinks, and when that company lacks proprietary technology or cost advantages its competitors can’t match, the durability of its competitive position becomes questionable. Tesla’s EV market share erosion isn’t cyclical—it’s directional.

The Investment Decision

For investors accustomed to backing companies with clear competitive advantages, resilient management teams, and strong market positions, Tesla presents an increasingly difficult case. The company faces leadership risks (focused attention, brand reputation), market risks (collapsing share of a growing market), and strategic risks (whether it can preserve EV revenue—its largest generator—against rising global competition).

The question isn’t whether Tesla makes good cars. The question is whether it can defend its business when rivals are gaining faster, the CEO’s bandwidth is contested, and market dynamics have shifted fundamentally.

Sometimes, the smarter move is stepping back and waiting for clarity—or betting on businesses where the path forward is less uncertain.