Mizuho has lowered Tesla's (TSLA.O) Target Price by 16.5%, reflecting the challenges faced by the electric vehicle manufacturer, causing Tesla's stock price to decline.

Mizuho Analysts downgraded Tesla's Target Price by 16.5% on Monday morning, citing weak demand in the USA and EU markets, as well as increased competition in the China market.

The Analyst team has lowered the Target Price to between $430 and $515, while Tesla's stock price fell by about 5% on Monday.

"We estimate that Tesla's sales performance in major markets such as the USA, EU, and China in February 2025 will be far below market levels. Sales in the USA declined 2% year-on-year (overall market growth of 16%), sales in China declined 49% year-on-year (overall market growth of 85%), and sales in Germany (the largest electric vehicle market in Europe) plummeted by 76% year-on-year (overall market growth of 31%)." wrote Mizuho Analyst Vijay Rakesh in a report to clients.

Analysts noted that the reasons for Tesla's poor sales include geopolitical tensions, brand image damage in Europe and the USA, market share being eroded by competitors in China, and lower than expected demand for the Model Y facelift.

Tesla's market share in China is crucial, as its sales in Europe and the USA have recently declined significantly.

Additionally, Musk's relationship with the Trump administration and the "Department of Government Efficiency" (DOGE) has sparked protests at Tesla factories, damage to Tesla vehicles, and conflicts between protesters and Tesla owners.

Meanwhile, his supportive remarks towards the far-right in Europe have triggered a wave of protests across the continent.

Analysts have lowered Tesla's delivery forecast for 2025 from 2.3 million units to 1.8 million units and for 2026 from 2.9 million units to 2.3 million units. The market generally expects deliveries of 2 million units in 2025 and 2.3 million units in 2026.

After meeting with Sweden's Autoliv Inc. (ALV), the world's largest auto safety supplier, analysts gained new insights into how policy, regulation, and subsidy changes affect the global electric vehicle market.

The biggest uncertainty is tariffs. Mizuho pointed out that Canada and Mexico are important components of the North American auto supply chain, but about 8% of finished vehicles and 20% of Auto Parts do not comply with the US-Mexico-Canada Agreement (USMCA), meaning they could face tariffs of up to 20%, far exceeding the current 2.5%.

"From the meeting with Autoliv's CEO, we learned that many secondary/tertiary auto suppliers in North America currently have profit margins in the low single digits under the USMCA trade framework, and if tariffs rise to 25%, it could put serious financial pressure on these companies," the analyst wrote.

Mizuho expects that suppliers and original equipment manufacturers (OEMs) will pass on tariff costs to vehicle manufacturers in the next 6 months to 2 years, which will raise car prices for consumers in the USA and could impact demand, especially with the tariffs coming into effect on April 2.

Additionally, the EU's CO2 emissions standards for 2025-2027 will account for combined targets, which could lead to a 7%-10% decline in sales in 2025 unless there are no enforcement requirements for this target that year.

Meanwhile, the United Kingdom has postponed the ban on the sale of fuel vehicles from 2030 to 2035, which could pose a downside risk to IHS-EU's electric vehicle sales forecast (expected to grow by 41%).

Mizuho has lowered its global electric vehicle and lithium-ion battery market growth forecast for 2026 from 21% to 15%.

Although Mizuho maintained its expectations for General Motors (GM.N), NIO (NIO.N), and Rivian (RIVN.O), it has lowered Rivian's Target Price from $13 to $11.

"We believe General Motors will benefit from the slowdown in electric vehicle growth as its gasoline vehicle product line remains strong. NIO is in a favorable position in the China market, but its valuation is relatively fair compared to peers. As for Rivian, we believe its electric vehicle product lineup is decent, but it lacks catalysts in the short term," the Analyst noted in the report.

So far this year, Tesla's stock price has fallen 41%, while the S&P 500 Index (SPX) has only declined by 4%.