Elon Musk’s parlay into politics has caused a world of hurt for Tesla. Market reaction to Musk’s bromance with President Donald Trump and his jockeying with DOGE have caused Tesla sales around the world to tank while recalls have battered the brand’s reputation and boycotts have led to a strong global anti-Tesla sentiment.
Last week, a company earnings release showed that Tesla profits fell 71% over the first three months of this year, while revenue from car sales dropped 20% over the same period. Meanwhile, sales of Teslas in Europe plunged 45% year-on-year in the first quarter of 2025 according to figures from the European Automobile Manufacturers’ Association (ACEA).
Tesla stocks entered ‘meme stock’ category
The question right now is—should Musk stay or step down as Tesla CEO? To stop the rot, alleviate plummeting sales, and save the company, it would seem the right choice to step down. However, now that Tesla’s stock has entered “meme stock” category—which are company shares that have gained a cult-like following on social media but come with high volatility and risk—the carmaker would likely crash without him pumping it. Indeed, is his leadership of the company a blessing or a hindrance to Tesla?
The brand is obviously in need of new leadership with its brand image taking a dive and EV sales falling at unprecedented rates, partly due to Musk alienating half of the company’s customer base and partly as a result of his leadership favoring autonomous driving over the development of a more diverse product portfolio.
Musk has made himself too contentious
Currently spending his time between a fist full of different projects and committing serious blunders in most, Musk has made himself too political and contentious to be the face of a consumer goods company.
Under Musk’s leadership, the brand has launched only one new vehicle in the last 5 years—the Cybertruck, and it has been a total commercial failure embroiled in recalls and boycotts. He has also been consistently wrong about when Tesla would solve the self-driving question for the last decade. To be bluntly honest, most CEOs would have been fired by now. Everything happening at and around Tesla now strongly suggests that new leadership is a must for the brand.
In direct contrast though, there is one aspect of Tesla that would not benefit from Musk stepping down—the brand’s stock. Late last week, it was trading at a surprisingly overvalued 165 price-to-earnings ratio (P/E) amid declining earnings. This means that investors are paying 165 times the company’s earnings for each share, which, when translated, means that the stock is overvalued.
People still believe Musk will solve real-world AI
The only reason Tesla is able to sustain this P/E level at the moment is that a surprisingly high percentage of people believe Musk when he claims that Tesla is about to solve “real-world AI,” which includes humanoid robots and self-driving cars. This writer knows of a small group of investors in Japan who each invested ‘many millions’ in Musk’s non-Tesla related businesses as they still believe in his potential. And there you have it.
Since Tesla’s core business is in free fall and would support Tesla trading at roughly a fifth of its current valuation, no one can argue that Musk’s claims about the company’s self-driving and robotic efforts have anything to do with the stock price, which has essentially turned into an indicator of how much investors trust Musk’s claims.
As a result, the stock price depends on people believing that Musk, who has continuously been mistaken about Tesla’s ability to solve the self-driving issue and has never released any data to support his claims, is correct this time about the company’s impending autonomous driving solution and its competitive advantage.
The bottom line—if the fiery South African was to step down, those individuals would probably take their stock with them, leading to a likely collapse.
So it would seem as though circumstances as they are panning out in real time could allow him to stay on.