Why Does Tesla Stock Keep Rising Despite Down Sales, Stalled Projects, and a Disintegrating Brand?

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Tesla stock has gained more than 25% over the past month, rising sharply even as the company faces some of its worst performance signals in years. Vehicle sales are plunging across key global markets. Meanwhile, its planned product rollouts have stalled while CEO Elon Musk remains at the center of controversy. Despite all this, the market is rallying behind the company. Why?

In Europe, Tesla’s April sales dropped 49% year-over-year, even as overall battery electric vehicle registrations increased by nearly 28%. Tesla sold just over 7,200 units in the region last month, down from more than 14,000 a year prior. The Model Y has underperformed despite a refresh. Demand for the Cybertruck has yet to materialize. And in the U.S., Tesla reported a 13% global sales drop in Q1 2025, its worst quarter since 2022.

The list of problems continues. No new mass-market vehicle has been announced. RoboTaxi, originally promised for 2020, is now targeted for late 2025. Full Self-Driving, which has remained in beta for over four years, is now said to reach wide release by mid-2026, pending regulatory approvals. Meanwhile, competitors like BYD and legacy automakers are gaining market share in China and Europe, particularly through plug-in hybrids and lower-cost EVs.

Brand Damage and Musk’s Public Face

Compounding these business concerns is a steep decline in Tesla’s brand equity. In Europe, consumer backlash has grown following Elon Musk’s public support for far-right parties and his political role under the Trump administration. He recently confirmed he spends part of each week advising on government efficiency, drawing criticism from investors who question his commitment to Tesla.

Protests erupted at Tesla dealerships in Germany and the UK. Analysts note that Tesla’s polarizing leadership is eroding support among politically moderate and left-leaning buyers. Musk has claimed Tesla is gaining ground on the right, but that tradeoff has not translated into sales.

A Stock Rally That Defies Gravity

Despite all this, Tesla shares have staged a rally. After hitting a year-to-date low in April, the stock has climbed 25% in four weeks. As of this week, it is down only 6% on the year. This disconnect between poor fundamentals and strong market performance is raising eyebrows among analysts.

Several factors may explain the rally. The first is Musk’s public statement that he will scale back his time advising the Trump administration. That comment was followed by institutional buying, suggesting investors saw a return to focus on Tesla operations.

Second, the market may be speculating on longer-term automation bets. Musk has teased a major unveiling of RoboTaxi later this year. Even if delayed, the idea of a fully autonomous revenue stream keeps speculative buyers interested.

Third, Tesla has become something of a proxy for AI optimism. Musk continues to blur the lines between Tesla and his other ventures, particularly xAI. Investors may be betting that Tesla’s data advantage in self-driving tech could lead to future monetization, especially if AI regulation remains loose.

Finally, there is short-covering. After months of bearish positioning, traders who bet against Tesla may be buying back shares to close out positions, pushing the price higher in the short term.

A Rally Without a Foundation

None of these factors resolve Tesla’s core problems. Sales are falling. Product development is delayed. Public sentiment, particularly outside the U.S., is deteriorating. And key market share gains are going to rivals with broader EV lineups or hybrid options that Tesla does not offer.

The current surge may be driven by sentiment and positioning, not fundamentals. That makes it fragile. If Musk fails to deliver clarity on timelines, or if another poor quarter confirms that demand is slipping, the rally could reverse as quickly as it started.

Is Tesla’s stock price a bet on future breakthroughs or just investor denial? Tell us what you think.

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