2 reasons to distance yourself from Tesla in 2025, according to Warren Buffett logic

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

EV company Tesla (NASDAQ: TSLA) has had a rough year. One on hand, EV sales rose in quarter three, and the energy business is growing steadily. On the other hand, EV tax credits expired in September, and the Pew Research Center has polled declining support for solar and EVs. 

While meaningful, these may be short-term headwinds. Going deeper, we’ll look at Tesla through the lens of Warren Buffett, one of the greatest investors of all time. Warren Buffett’s partner, Charlie Munger, strongly suggested that investors “invert, always invert” when considering investments.

Here, we’ll invert by swapping “reasons to invest in Tesla” with “reasons to distance yourself from Tesla.” In doing so, we can quickly pinpoint who might be better off investing elsewhere. 

1. Tesla’s CEO has reputation issues and lacks focus

Trust is crucial to any business. Warren Buffett has said, “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.” I think Tesla has stumbled more than once here. The EV company — CEO Elon Musk in particular — has built a reputation not just for excellent cars, but for partisan politics. That’s worrying.

People associate Tesla’s brand with Elon Musk’s politics. A 2025 study by the nonpartisan National Bureau of Economic Research suggests that Tesla sales between October 2022 and April 2025 would have been 67-83% higher (1-1.26 million more vehicles sold) had the Tesla CEO avoided polarization. If so, this may be why trailing 12-month vehicle deliveries peaked at ~1.8m in Q3 of 2023. Despite slashing Tesla prices 20% in 2023, deliveries have remained flat or down.

Mr. Musk also poses a growing risk to management. In a 1996 Berkshire Hathaway shareholder letter, Warren Buffett says, “Loss of focus is what most worries Charlie and me when we contemplate investing in businesses that in general look outstanding. All too often, we’ve seen value stagnate in the presence of hubris or of boredom that caused the attention of managers to wander.”

Elon Musk’s attention seems sporadic. He has founded seven companies and is actively participating in six (Tesla, SpaceX, Neuralink, xAI, X.com, The Boring Company). In 2024-2025, he spent months at the White House running the Department of Government Efficiency (DOGE). After that, he floated the idea of a third political party to X.com users.

The risk of Elon Musk losing focus on Tesla is so high that the company’s board of directors has released a letter to the public, urging shareholders to approve a pay package that could be worth a trillion dollars, in order to prevent Elon from leaving the company. Recently, shareholders approved the package.

While the pay package does a good job of aligning incentives, it’s no guarantee that Elon Musk will prioritize Tesla.

2. Tesla lacks a durable competitive advantage

Competition is something to watch. In a 1999 Fortune Magazine interview with Carol Loomis, Warren Buffett says, “The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage.” Tesla produces excellent cars, and its growing automation efforts may significantly impact society. But it seems to lack a moat that protects its share of the EV market.

Declining EV sales isn’t a global problem; it’s a Tesla problem. Trailing 12-month deliveries of Tesla vehicles reached a peak in 2023. However, global EV sales increased from over 13 million to 17 million between 2023 and 2024. In the U.S., Tesla’s home turf, sales of EVs rose from 1.2 to 1.3 million. All this indicates stiffer competition in what should be Tesla’s strongest region (the U.S.). Unfortunately, Tesla has far from recovered. By August 2025, Tesla’s U.S. market share of EVs fell from 80% to 38%, an eight-year low.

Global competition is already stiff and rising. Chinese groups BYD (OTC: BYDDY) and Geely (OTC: GELYY) boast the greatest market share and are growing. (Berkshire Hathaway purchased BYD shares in 2008, selling in 2025 for a tidy profit.) According to a study by SNL Research, Tesla hasn’t just lost market share in every major market. It’s the only top global EV company with a negative growth rate (-11% between January and August 2025, by deliveries).

I think it’s worth asking whether Tesla’s current business can withstand competition in EV sales, its biggest revenue generator. It had a first-mover advantage, but Tesla’s momentum is gone.

Risk is leadership and competition

If I were Warren Buffett, I’d take issue with Tesla’s CEO (poor reputation, unfocused) and lack of competitive advantage. Tesla’s CEO poses a long-term risk to trust and focus, and Tesla is losing market share to competition. I’ll be holding off on adding to my Tesla position until I’m confident that Tesla’s CEO will prioritize Tesla. Until then, I’m better off investing in higher-confidence businesses. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 2 reasons to distance yourself from Tesla in 2025, according to Warren Buffett logic appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Cole Tretheway owns Tesla stock. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended BYD Company. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.