Tesla Stock Drops. The Silver Lining in Slumping EV Sales

Tesla stock was lower to start a new week of trading as investors weighed what a struggling electric-vehicles business means for the stock.

Tesla stock was down 2.2% at $402.82 in morning trading, while S&P 500 futures were off 0.2%, while Dow Jones Industrial Average futures were off 0.5%.

Tesla shares dropped 1.3% this past week, despite ending on a mini-streak. The stock rose for three consecutive days to end the week, but only gained $1.19, or 0.3%, over that span.

It was the third drop for the stock in the past four weeks. Not helping was U.S. EV sales, which plunged 30% year over year in January, accounting for just 6% of the total new car market.

Losing the $7,500 federal purchase tax credit at the end of September has hurt. Auto makers have reacted by cutting prices. Average EV selling prices dropped 3% year over year in December. Lower EV pricing is a “major theme” Cantor Fitzgerald analyst Andres Sheppard expects to continue this year.

The silver lining in lower sales for Tesla is a higher market share. Its January sales only dipped 17%, and its market share reached about 61%, up from 57% in December. When the tax credit was still active, Tesla’s share had dipped below 50%.

Coming into Monday trading, Tesla’s stock was down about 8% so far this year, but up 22% over the past 12 months—about seven percentage points ahead of the S&P 500.

Investors haven’t worried too much about falling car sales at Tesla. Shares hit a record high in December at almost $500 each, despite two consecutive years of EV sales declines. Instead, investors are focused on AI applications such as robo-taxis and robots. Tesla launched a robo-taxi service in Austin, Texas, in June. Its shares were about $322 at the time.

Investors shouldn’t completely forget the car business, though. Cars make Tesla most of its money, and it needs money. The company plans to spend some $20 billion on new equipment this year, boosting its ability to produce robo-taxis and robots. Tesla typically spends less than $10 billion on new equipment annually.