Tesla stock is no stranger to big pops and drops.
The company’s CEO, Elon Musk, is one of America’s most divisive corporate leaders because of his mercurial nature. As a result, Tesla’s stock price has taken a roller coaster ride over the past decade.
Elon Musk’s supporters applaud his seemingly single-handedly taking the electric vehicle market mainstream. His detractors point to a string of broken promises on model launch timelines and Tesla’s much-delayed autonomous vehicles.
More recently, the debate between fans and foes has intensified due to his spending hundreds of millions supporting President Trump’s election bid and his new role running the Department of Government Efficiency, or DOGE, an organization in the executive branch tasked with cutting costs.
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Musk’s foray into politics has frustrated once-loyal, left-leaning supporters worldwide, causing sagging Tesla sales in markets such as Europe, China, and California.
As a result, Tesla shares have taken a roller coaster ride in 2025. Shares fell 54% from its December peak to its low in April before rallying 52% since April 9 after President Donald Trump paused most of the reciprocal tariffs announced on April 2.
The impressive rally has caught many investors flat-footed, but additional gains may be harder to come by, particularly now that an uncommon warning signal has flashed.
Elon Musk’s Tesla is struggling in 2025, but its stock price has surged recently.
Tesla struggles to maintain its moat
Tesla’s (TSLA)  became an aspiration vehicle coveted by celebrities and performance fans because of an important decision by Elon Musk to concentrate on luxury and speed rather than the environment.Â
The decision resulted in vehicles that could hold their own against rivals like Mercedes-Benz, BMW, and Porsche, leaving competitors like Ford and General Motors flat-footed and without competing EVs to sell to willing buyers.
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Unfortunately for Tesla, the luxury and performance gap with competitors has closed.
Detroit’s big three car companies and almost every automaker worldwide have spent billions building EVs offering similar performance and potentially better fit-and-finish.
Stiffening competition has caused Tesla’s electric vehicle market share to shrink at the same time that demand has fallen because of Musk’s political activism.
Tesla’s first-quarter sales fell 62.2% year-over-year in Germany, according to KBA, and U.S. unit sales volume declined 9% from last year in Q1, according to KBB.Â
In California, Tesla registrations dropped 21.5% in Q1 versus Q1 2024, while non-Tesla EV registrations increased 14%.Â
According to the Cox/KBB quarterly EV sales report, while U.S. Tesla units sold tumbled in the first quarter, Ford’s EV sales rose 12%, and General Motors brands Cadillac, GMC, and Chevrolet grew 37%, 184%, and 114%.Â
Tesla stock may face headwinds after rare warning signal
Tesla’s struggles haven’t disappeared despite its stock price marching significantly higher over the past six weeks.
As a result, investors are right to wonder if the rally in Tesla shares will stall until there’s more clarity that the company is back on track.
In its recent first-quarter conference call, Elon Musk said he would refocus on Tesla and spend less time on DOGE.Â
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Musk has also said recently in Qatar that, “Europe is our weakest market, but we’re strong everywhere else. Our sales are doing well at this point, and we don’t anticipate any sales shortfall.”
Those signs are encouraging, but Musk didn’t provide evidence supporting his claim, and until more sales data comes in, Tesla fans will feel a bit uneasy.
It doesn’t help matters that one technical indicator raises a red flag that Tesla’s stock may have run too far, too fast.Â
The relative strength index, or RSI. RSI (14) measures price action over the preceding 14 trading periods and can signal when stocks become overbought and oversold.
When the RSI is above 70, it signals buyer beware. However, when it dips below 30, it can suggest shares may be about to move higher.
For example, Tesla’s RSI eclipsed 80 in mid-December when shares were near $480. Its RSI was in the 20s at its recent lows near $220.
The RSI isn’t as high as December, but it was nearly 73 on May 14.Â
The move up in RSI above 70 could mean that Tesla’s stock price is due for a breather after its big run, but nothing is guaranteed. Stocks can get and remain overbought and oversold for a while. Stocks rarely turn on a dime.
Nevertheless, the technical signal is a yellow flag suggesting more gains could be harder to come by in the short term. What happens long-ter is anyone’s guess, but it will likely hinge on whether or not Musk is correct that its demand problem is going away.
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