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Tesla (TSLA) faces mounting pressure as its declining EV sales collide with intensifying competition from Chinese automaker BYD and growing analyst concerns about the company’s trillion-dollar valuation. Despite CEO Elon Musk’s AI narrative, car sales still drive most of the company’s revenue.

Tesla Faces Tough Competition from Other EV Makers
 

Chinese giant BYD has overtaken Tesla in UK monthly sales for the first time, registering over 3,000 new vehicles in May compared to Tesla’s approximately 2,000. This represents a five-fold increase for BYD year-over-year and a 33% decline for Tesla.

The trend extends globally, with Tesla’s Shanghai Gigafactory—its largest manufacturing plant—suffering an eighth straight month of declining demand, falling 15% in May to 61,662 vehicles. Both the UK and Germany reported identical 36% drops in Tesla registrations last month.

Tesla’s Stock Performance and Valuation Concerns
 

Tesla closed at $317.06 on June 5, down 4.52% for the day, with a market cap of $1.022 trillion. Despite being the ninth most valuable company globally, the stock shows troubling metrics: a PE ratio of 189.74, YTD returns of -21.42% (versus S&P 500’s +1.51%), and what analysts call a valuation “disconnected from underlying fundamentals.”

Notable Tesla bull Gary Black exited his position in late May, citing downside risks. The company’s core automotive business, which generated 72% of revenue and gross profit in Q1, saw volumes drop to three-year lows even as the stock rallied 33% since April earnings.

Tesla’s challenge lies in justifying its trillion-dollar valuation through AI and robotaxi promises while its core EV business contracts globally. Sales trackers warn Q2 could see an 11% drop to 395,000 cars in a best-case scenario.

With two-thirds of Q2 complete and no signs of recovery, Tesla’s ability to execute on AI ambitions while stabilizing automotive sales will determine whether its premium valuation remains sustainable.

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