Tesla stock declined on Monday, underperforming the broader market as investors digested fresh developments around the company’s supply chain and regulatory scrutiny, even as the stock remains sharply higher for the year.
Shares of Tesla were down around 2% at $460.92 in midday trading.
The broader market was also weaker, with the S&P 500 and the Dow Jones Industrial Average down roughly 0.4% and 0.3%, respectively.
Battery supply deal scaled back
The latest pullback comes as Tesla’s supply agreement with South Korean battery materials maker L&F saw a dramatic reduction in its projected value.
The deal, which covers the supply of high-nickel cathode materials to Tesla and its affiliates from January 2024 through December 2025, was initially estimated to be worth $2.9 billion.
That figure has now been revised sharply lower to just $7,386, according to updated disclosures.
The change has raised questions among investors about the scale and timing of Tesla’s battery procurement plans, even as the company continues to emphasise long-term investments in autonomy and artificial intelligence rather than near-term vehicle volumes.
Regulatory scrutiny adds to pressure
Tesla is also facing renewed regulatory attention.
The National Highway Traffic Safety Administration, or NHTSA, has opened an investigation into emergency door releases on certain Model 3 vehicles.
The probe follows a petition from a Georgia-based owner who alleged that the mechanical door release can be difficult to locate during emergency situations.
While the investigation is at an early stage, it adds another layer of uncertainty at a time when Tesla’s core automotive business is already under pressure from falling sales and declining earnings expectations.
Tesla stock in 2025
Despite Monday’s decline, Tesla shares were still up about 18% year to date heading into the session.
That performance stands in stark contrast to the company’s underlying fundamentals.
Earnings estimates have fallen sharply, and vehicle sales continue to trend lower.
For 2026, Wall Street now expects Tesla to generate earnings per share of $2.17, down from roughly $4.25 projected a year ago.
For the fourth quarter, analysts forecast EPS of about 44 cents, compared with 73 cents in the same period last year.
Vehicle delivery expectations have also slid.
Fourth-quarter sales are now estimated at around 440,000 vehicles, down from approximately 496,000 a year ago, with some of the most recent estimates drifting closer to 415,000 units.
Yet those declines have not materially dented investor enthusiasm.
“Auto volumes (and broader fundamentals) have increasingly become an afterthought,” wrote Dan Levy, an analyst at Barclays, in a recent report.
Levy said Tesla’s stock is now being driven “almost exclusively by narrative,” centred on potential inflection points in robo-taxis, humanoid robots such as Optimus, and artificial intelligence. Barclays rates the stock Hold and has a $350 price target.
Robotaxis take centre stage
Those inflection points are largely tied to Tesla’s autonomous driving ambitions.
The company launched a limited robo-taxi service in Austin, Texas, in June, operating with safety monitors. Removing those monitors is widely viewed as a key milestone.
Elon Musk fueled optimism over the holidays, posting on Dec. 24 that he had driven in a Tesla robo-taxi without a safety monitor.
Musk has previously suggested that Tesla’s autonomous service could eventually reach half the US population, though that timeline has since slipped.
Still, Dan Ives of Wedbush Securities remains bullish. He expects Tesla robo-taxis to be operating in 30 cities by the end of 2026, potentially surpassing Waymo, which currently operates in five cities. Wedbush rates Tesla Buy with a $600 price target.
A great deal is riding on that progress. Tesla now trades at roughly 220 times estimated earnings over the next 12 months, making it the most expensive stock in the S&P 500.
The next closest comparison is Palantir Technologies, which trades at around 190 times forward earnings.
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