On February 26th, Beijing time, U.S. stock markets closed amidst a turbulent session. Tesla shares plunged 8.39% (amounting to a loss of approximately $85 billion, or roughly RMB 600 billion), with intraday losses surpassing 10% and the share price dipping below the $300 mark. This marked a significant decline from its all-time high of $488 in December 2024, with a drop of approximately 38%, and its market capitalization falling below the $1 trillion threshold.

The immediate catalyst for Tesla's stock woes was the launch of its Full Self-Driving (FSD) feature in China on the 25th. The technology's performance on Chinese roads fell short of expectations, prompting concerns among investors.

FSD is a significant contributor to Tesla's market valuation. Its underperformance in China suggests that standalone sales revenue projections may not be met, which in turn has weighed heavily on Tesla's share price.

Consequently, Tesla's stock price experienced a sharp downturn.

Tesla's pricing strategy for the full version of FSD in China is set at up to RMB 64,000, representing 27.18% of the starting price of the refreshed Model 3 (RMB 235,500) and 24.29% of the starting price of the refreshed Model Y (RMB 263,500). Given its low marginal costs, FSD boasts an exceptionally high gross margin.

However, FSD's underperformance in China will hinder Tesla's ability to generate additional gross margins through this feature. Furthermore, the impact of the refreshed Model Y on sales remains uncertain.

The underwhelming performance can be attributed to the unique characteristics of Chinese roads and the diversity of road users.

To address these issues, Tesla needs to establish a domestic team focused on resolving the challenges encountered in implementing FSD in China.

Another concern is that Tesla's FSD relies solely on vision technology, which contrasts with the lidar approach adopted by Chinese automakers. The poorer performance of FSD highlights the importance of lidar technology.

Listed companies such as Hesai (U.S. stock market) and RoboSense (Hong Kong stock market) have seen their share prices surge approximately fourfold from their lows. Hesai's share price has risen from over $4 to around $20, while RoboSense's share price has jumped from just over HK$10 to around HK$50.

Deeper underlying the recent downtrend in Tesla's stock price since its December 2024 peak is the anticipation of potential setbacks for Elon Musk. Markets are pricing in the risks associated with Musk's personal and political challenges.

As Musk is deeply involved in U.S. government affairs, his leadership of the Department of Government Efficiency (DOGE) carries significant responsibility for reducing government spending. This is bound to clash with vested interests, particularly the audit issues of the Pentagon involving the military-industrial complex.

This places considerable pressure on Tesla, a consumer-facing brand. In the U.S. two-party system, incidents of malicious vandalism against Tesla vehicles have already occurred, and the trend is escalating.

Despite the continuous strengthening of Musk's security team, the influence of the military-industrial complex cannot be underestimated. The U.S. has a history of assassinations, targeting both high-ranking officials and whistleblowers. Cases of assassination or suicide are not uncommon.

Should Musk encounter any personal setbacks, Tesla's share price would undoubtedly come under severe pressure, explaining the continued decline in its stock price.

Capital markets are preemptively pricing in the potential for Musk's personal challenges.

If Musk were to face significant setbacks, could Tesla's stock price halve overnight, or could it plummet by 60%, 70%, or even 80%? After all, Musk does not possess the mystical abilities of Taiyi Zhenren, who could theoretically resurrect himself with lotus root starch.