Tesla (TSLA) released its Q1 2025 deliveries yesterday, April 2. The company’s deliveries fell 13% year-over-year. In absolute terms, Tesla’s deliveries fell to a nearly three-year low.

The market was at least partially expecting this after data showed the company’s sales slumping in China and Europe in the first two months of the year.

Analysts also started tempering expectations and had lowered their forecasts for Tesla’s Q1 deliveries over the last month. However, the company failed to clear even that low bar. Tesla’s stock initially plunged following the delivery report, which Wedbush analyst Dan Ives – who happens to have the Street-high target price of $550 on the stock – described as a “disaster.” However, the stock eventually closed higher amid reports that CEO Elon Musk’s stint with President Donald Trump’s Department of Government Efficiency (DOGE) is ending soon.

In recent days, both Trump and Musk have hinted about the possibility of him eventually returning full time to his responsibilities at Tesla. This would be good news for TSLA investors, as concerns over Musk not spending enough time in the CEO seat have been among the reasons the stock has fallen this year. 

Will his return to the helm be enough to pull the company back from what looks like a crisis? Let’s examine.

What Has Been Plaguing Tesla Stock?

Tesla’s problems are multi-fold and not limited to Musk’s association with DOGE and the Trump administration – even though the billionaire’s politics seems to have disenchanted some potential Tesla car buyers.

Tesla is battling intense competition, especially in China where domestic brands have surged ahead. BYD (BYDDY) took the crown of the biggest seller of battery electric vehicles (BEV) seller from Tesla in Q1 after having surpassed the Elon Musk-run company’s revenues last year. Musk was incidentally quite prophetic about the capabilities of Chinese EV companies and during Tesla’s Q4 2023 earnings call observed “Frankly, I think if there are no trade barriers established, [Chinese car companies] will pretty much demolish most other companies in the world.”

Chinese automakers have stepped up their game and offer compelling value propositions. Last month, BYD unveiled its new charging technology. According to reports, its new tech can charge a vehicle for 400 kilometers (249 miles) in 5 minutes.

Chinese EV Companies Are Offering Self-Driving Features for Free

BYD not only offers models much cheaper than Tesla, but is also now offering self-driving features for free after partnering with Chinese artificial intelligence (AI) startup DeepSeek.

Chinese EV company Zeekr (ZK) is also rolling out self-driving features for free. Xpeng Motors (XPEV) has also expanded its autonomous driving capabilities and its management is hopeful of achieving L3 autonomy later this year and L4 – or fully autonomous driving – in “low-speed scenarios” next year.

After the EV price war, Tesla might now need to live with an “autonomous driving price war.” There are already signs that the demand for Tesla’s full self-driving (FSD) is tepid at higher prices, and Tesla has already cut the price twice to $8,000. At its peak, Tesla was offering its FSD for $15,000, and Musk previously said that the price could rise as high as $100,000.

To sum it up, autonomous driving – which was expected to be a medium-term driver for Tesla – is now facing serious headwinds from Chinese competitors.

Can Tesla Make It Big with Humanoid Robots?

At Tesla’s shareholder meeting last year, Musk said that the company’s Optimus humanoid could add $25 trillion to Tesla’s market cap. 

To be sure, humanoids could be the next big thing for Tesla as products like robots are the next logical conclusion in the artificial intelligence (AI) pivot. However, after giving Tesla a tough fight in the EV and autonomous driving industries, Chinese companies look set to challenge it in robotics also. According to Reyk Knuhtsen, an analyst at SemiAnalysis, “China has the potential to replicate its disruptive impact from the EV industry in the humanoid space.” Given what China has achieved in the EV industry it would be foolhardy to dismiss the possibility of Chinese companies offering advanced robotics at a fraction of what Tesla might offer.

All said, Tesla is now facing credible threats from Chinese companies in electric cars in the short term, autonomous driving in the medium term, and robotics in the long term. While Musk’s return to the steering wheel would be a good start, the company needs some deft maneuvering to restore investor confidence now.