Why Tesla Stock Could Plummet by 50% in 2025, Insights from Ross Gerber

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Ross Gerber outlines key reasons for his bearish outlook on Tesla's future / Emma McIntyre / Staff/Getty Images

Ross Gerber, an early investor in Tesla, has become increasingly vocal about his concerns regarding the company and its CEO, Elon Musk. Despite being a long-time supporter, Gerber has recently divested a significant portion of his Tesla holdings, citing various issues he believes will negatively impact the stock. In an interview with Business Insider, he elaborated on four main reasons why he anticipates Tesla shares could experience a staggering decline of up to 50% in 2025.

Firstly, Gerber is highly skeptical of Tesla's Full Self-Driving (FSD) technology. He argues that Musk's ambitious deadline for launching an autonomous taxi service in Austin, Texas, is unrealistic. Gerber contends that Tesla’s FSD platform lacks the necessary LIDAR sensors, which are essential for safe autonomous driving. Unlike competing systems such as Waymo, which rely on LIDAR, Tesla's approach, based solely on cameras, may hinder progress. Gerber expresses concern that without a change in hardware, the company will struggle to improve its autonomous driving capabilities, leading to potential setbacks.

In addition to technological shortcomings, Gerber believes that Elon Musk's numerous commitments have diluted his focus on Tesla. With responsibilities spanning multiple companies—including SpaceX and xAI—as well as his active presence on social media and his personal life as a father of 11, Gerber argues that Musk's divided attention is detrimental to Tesla. He suggests that if Musk dedicated more time to addressing the challenges surrounding Full Self-Driving, it could inspire greater confidence among investors.

Gerber also points to a slowdown in vehicle sales as a critical concern. For the first time, Tesla reported an annual decline in electric vehicle (EV) sales last year. Despite initially forecasting growth for 2025, Tesla management later tempered expectations, acknowledging the potential for a more gradual return to sales growth. Gerber emphasizes that intensified competition from companies like BYD, which is aggressively expanding in the global EV market, poses a serious threat to Tesla's dominance, especially in emerging markets. He notes that government support for domestic Chinese manufacturers further complicates Tesla’s position in these regions.

Additionally, Gerber highlights the backlash against Musk's political affiliations, particularly following his association with former President Donald Trump. This sentiment appears to be affecting consumer perception of the Tesla brand, leading to notable sales declines in key European markets. Reports indicate that Tesla's vehicle sales in countries like France, Germany, and Norway plummeted by significant margins, underscoring the potential fallout from Musk's political image.

Lastly, Gerber critiques Tesla's premium market valuation, which has historically set it apart from traditional automakers. With a market capitalization of approximately $1.1 trillion, Tesla's valuation is nearly five times larger than that of Toyota, despite delivering a fraction of Toyota's profits. Gerber points out that Tesla's forward price-to-earnings (P/E) ratio of 118 is exceptionally high compared to industry peers and its own historical averages. He warns that if Tesla's sales continue to decline, the inflated valuation could lead to a sharp correction in the stock price.

Gerber's perspective aligns with a cautious outlook shared by some financial analysts. For instance, JPMorgan has recently adopted a bearish stance on Tesla, maintaining a price target that suggests significant downside potential. Given these factors, Gerber remains cautious about Tesla's prospects, emphasizing the need for the company to navigate its challenges effectively to avoid substantial stock declines in the coming year.

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