Tesla’s stock faced significant selling pressure on Monday, declining approximately 4.5% to trade near $470 by 16:05 CET. The downturn was fueled by a confluence of negative developments, including the effective cancellation of a major battery supply agreement, widening competitive threats from Chinese rival BYD, and mounting concerns over potentially weak fourth-quarter delivery figures.
A Broken Contract and Shifting Market Leadership
The most immediate catalyst for the sell-off was news from South Korean supplier L&F Co. The company revealed that a $2.9 billion contract to supply high-nickel cathode material—intended for the Cybertruck—had been slashed to a mere $7,400, representing a reduction of over 99%. This drastic cut signals significant production delays or a lack of demand, casting doubt on the rollout of Tesla’s newer vehicle models.
Concurrently, the latest sales data confirms a shift in the global electric vehicle landscape that has been building for months. Chinese automaker BYD has now overtaken Tesla, having sold 2.07 million battery-electric vehicles through the end of November 2025. For the full year, Tesla is projected to deliver only about 1.65 million units, marking a 7.7% decrease from the prior year.
Q4 Delivery Fears and a Fading Incentive
The situation is further complicated by the expiration of a key U.S. government incentive. Following the removal of the $7,500 federal tax credit in September 2025, many buyers pulled their purchases forward into the third quarter. Consequently, the final quarter of the year is expected to show notable weakness. Market analysts now anticipate Q4 deliveries in a range between 405,000 and 449,000 vehicles. A disappointing result would underscore persistent challenges in Tesla’s core automotive business.
A minor positive note was struck by analysts at Stifel, who highlighted improvements in the Full Self-Driving software (version 14.2.2) released on December 22. Driver reports suggest smoother steering and better obstacle detection. However, these incremental software advances were insufficient to counterbalance the hard realities impacting vehicle sales and investor sentiment on Monday.
Soaring AI Hopes Meet Ground-Level Realities
The day’s sharp correction stands in stark contrast to the euphoria that propelled the stock just one week earlier. On December 22, Tesla shares hit an all-time high of $498.83. That rally was driven largely by narratives surrounding artificial intelligence and the future potential of robotaxis—stories that have helped inflate the company’s valuation to nearly 300 times its expected earnings.
The growing disconnect between this AI-driven valuation and the pressures facing the core auto business is becoming increasingly difficult to ignore. While the long-term vision remains, investors are now forced to seriously weigh the risks of this transitional phase, underscored by the collapsed supply contract and BYD’s rising dominance.
The official announcement of Tesla’s Q4 production and delivery numbers is expected in early January 2026. A figure below 405,000 units could test critical technical support levels around $450. Looking further ahead, market focus will shift to the company’s “Project Redwood” and the planned commencement of robotaxi production in April 2026.
