• Tesla shares fell another 5.6% in Thursday trading, extending a recent pullback.
  • The decline comes amid broader tech sector weakness and renewed concerns about EV demand.
  • Analysts cite macroeconomic headwinds and rising competition as key factors.

Losses Mount

Tesla Inc. shares tumbled 5.6% in afternoon trading on Thursday, building on losses from earlier this week. The stock was on track for its worst session in over a month, dragging down the broader consumer discretionary sector. The decline follows a period of volatility, with the stock still up roughly 20% year-to-date but down from recent highs.

Investors appear to be recalibrating expectations for the electric-vehicle maker amid a challenging macroeconomic environment. Rising interest rates and persistent inflation have raised concerns about consumer demand, particularly for big-ticket items like EVs. Meanwhile, Tesla's price cuts earlier this year have squeezed margins, even as deliveries continue to grow.

“The market is reassessing the growth narrative for Tesla as competition intensifies and macro headwinds mount,” said one analyst who asked not to be named due to firm policy. “The stock's high valuation leaves little room for error.”

Sector-Wide Pressure

Tesla's drop mirrored declines in other EV and tech stocks, with the Nasdaq Composite falling 1.2% on Thursday. The broader automotive sector also faced pressure after a report showed slowing EV sales growth in key markets. In China, Tesla's second-largest market, rivals like BYD Co. have been gaining share with aggressive pricing.

Regulatory uncertainty is also weighing on sentiment. The Biden administration's proposed emissions standards have sparked debate, while potential tariff changes on Chinese-made components could impact costs. Tesla has been ramping up production at its Texas and Berlin factories, but supply-chain disruptions remain a wild card.

Watchers Eye Support Levels

From a technical perspective, Tesla's stock is approaching a key support level around $230, a price point that has historically attracted buyers. A break below that could open the door to further losses, traders say. Options market data shows elevated levels of bearish bets, suggesting many investors are hedging against additional downside.

Still, some analysts see the pullback as a buying opportunity. “Tesla remains the leader in EVs and energy storage, and its long-term fundamentals are intact,” said a portfolio manager at a large asset manager. “Short-term noise doesn't change the company's trajectory.”

Tesla did not respond to a request for comment on the stock's movement.

Correction (May 18, 2024): A previous version of this article misstated the percentage decline. Shares fell 5.6%, not 6.5%.