Tesla (NASDAQ:TSLA) shares experienced a significant decline of approximately 5% by midday Tuesday, as a fresh U.S. safety investigation and a broader technology sector selloff overshadowed the company's robust rebound in European sales. The stock opened at $392.15 and later traded at $384.63, after hitting an intraday low of $382.10. With a trailing price-to-earnings ratio of about 353, the electric vehicle giant remains highly valued as investors await the second-quarter delivery report scheduled for July 2.
Safety Probe and Market Reaction
The National Highway Traffic Safety Administration (NHTSA) announced it would investigate a June 19 crash involving a Tesla Model 3 that struck a house in Katy, Texas, resulting in the death of a 76-year-old woman. Tesla's self-driving lead, Ashok Elluswamy, stated that the driver "manually overrode self-driving" by fully pressing the accelerator. CEO Elon Musk dismissed the crash report as "makes no sense," emphasizing that Tesla's Full Self-Driving software "drives slowly through neighborhood streets." This probe adds to regulatory scrutiny that could weigh on investor sentiment.
European Sales Rebound
On a positive note, Tesla's European registrations, a proxy for sales, surged 107.9% in May to 28,610 vehicles, marking four consecutive months of growth. However, rivals like BYD and Leapmotor outpaced Tesla, with registrations soaring 136.6% and 465.1%, respectively. The broader European market is shifting toward electrified models, with battery-electric cars accounting for 20% of new EU registrations in the first five months of 2026, up from 15.3% last year. Hybrids reached 37.8%, while petrol and diesel combined dropped to 30.1% from 38.0%.
Delivery Forecasts and Analyst Views
UBS raised its Q2 delivery forecast to 405,000 vehicles, a 5% year-over-year increase and 13% higher than last quarter, while maintaining a Neutral rating and $364 price target. The firm noted that most analysts expect deliveries between 400,000 and 420,000, with potential for Tesla to exceed if it ends the quarter strongly. Baird's Ben Kallo reiterated an Outperform rating and $522 price target, forecasting Q2 deliveries of 392,900, slightly below the consensus of 401,100.
Market Context and Risks
The broader market showed weakness, with the tech-heavy QQQ slipping around 2.6%. However, Tesla's decline was more pronounced than many growth names. Rivian shares were nearly unchanged, while Lucid gained about 1.5%, indicating that the pressure did not uniformly affect U.S. EV stocks. The current trade is divided: bulls focus on Europe's rebound, higher delivery guidance, and autonomy hopes, while bears highlight the federal investigation, rising Chinese competition, and a stock price that assumes many positive outcomes.
Investors face heightened risk as the next headline could break negatively. Regulators might identify a defect, the crash probe could expand, or delivery numbers might fall short after forecasts have been revised upward. Any of these scenarios could shift focus away from Europe's recovery and back to valuation, safety issues, and the challenge of holding an expensive stock amid a tech downturn.
