Tesla Inc. is in a sales slump, with deliveries of its electric vehicles on track to decline for the second full year in a row.
The polarizing politics of Chief Executive Officer Elon Musk have alienated car buyers in major markets. Customers have yet to flock back to showrooms after Musk stepped away from his activities in Washington and ended up in a very public feud with President Donald Trump.
But Tesla’s problems run deeper than the consumer backlash seen over the past few months. While the automaker has given its most popular model — the Model Y — a facelift, it’s lacking a new, more affordable car to revitalize its dated lineup. That’s left the company vulnerable to competitors, particularly those hailing from China.
Tesla’s $1 trillion market capitalization suggests investors remain buoyant. The value they ascribe to the company is increasingly rooted in Musk’s vision of a future filled with autonomous vehicles and humanoid robots, rather than the human-driven EVs in the here and now.
What’s happened to Tesla’s sales?
Deliveries hit an almost three-year low in the first quarter. The drop was due in part to the process of redesigning the Model Y, as Tesla paused output at each of its assembly plants to retool production lines for the revamped SUV.
The company was counting on the spruced up Model Y to boost sales in the second quarter. Overall deliveries instead slid 13% from a year earlier, undermining Musk’s claim in mid-May that sales had “already turned around.”
Sales Fall
First-half delivery drop puts carmaker on course for another full-year decline
By Musk’s own admission, Europe is the company’s weakest major market. The number of new Teslas registered across the region plunged 37% during the first five months of the year, according to the European Automobile Manufacturers’ Association — even as the broader market expanded. Industrywide battery-electric vehicle sales in Europe were up 28%.
Tesla’s struggles have created an opening for rival BYD Co. The Chinese automaker sold more fully electric cars in Europe than Tesla for the first time ever in April, in what one analyst called a watershed moment. Some are predicting BYD will pull ahead of Tesla globally for the full year — and that’s without BYDs even being available in Tesla’s home market, the US.
Cox Automotive estimates Tesla’s US vehicle sales fell 15% in the first half. Tesla is still the top-selling EV brand in the US, but its share of electric-car sales has shrunk from more than 75% in 2022 to under 50% as of 2024, according to Cox-owned Kelley Blue Book.
In China, the world’s biggest EV market, Tesla’s shipments from its Shanghai plant — destined both for domestic customers and for export — declined for eight consecutive months year-on-year before ticking up in June, according to the China Passenger Car Association.
Tesla Shanghai’s Shrinking Vehicle Shipments
An eight-month streak of declines ended in June
Why is Tesla losing ground in the EV market?
Musk has stuck to a less-is-more approach to Tesla’s lineup. The company only sells five vehicles — the Model S (which debuted in 2012), Model X (2015), Model 3 (2017), Model Y (2020) and the Cybertruck (2023) — and not all of these are available globally.
BYD, by contrast, offers substantially more models and most of them are cheaper than Tesla’s best-sellers, the Model Y and Model 3 sedan. BYD also announced in March that it had developed an EV battery system that can charge within five minutes, which could make the brand even more competitive.
New entrants are threatening Tesla’s standing, particularly in what was an already-crowded and competitive Chinese EV market.
The most noteworthy newcomer has been Xiaomi Corp., the smartphone maker that’s branched into car manufacturing. The company secured almost 300,000 pre-orders for its second electric vehicle, the YU7, within the first hour of making the SUV available. At around $35,000, it’s cheaper than Tesla’s Model Y.
A sub-$30,000 car has long been seen as key to further sales growth for Tesla. But the affordable vehicle Musk has been promising since his first “Master Plan” in 2006 has yet to materialize. In recent years, the company instead launched the Cybertruck, an expensive pickup that’s fallen well short of its CEO’s volume expectations.
Tesla told investors in April that new vehicles, including more affordable models, were on track to go into production during the first half of this year. But there’s still no sign of any cheaper new cars, leading analysts to speculate they may have been delayed.
It’s unclear whether Tesla will make meaningful adjustments to its lineup anytime soon. In the near term, it could just introduce stripped-down, lower-priced versions of existing models and look increasingly out of step with competitors’ fresher designs.
How much are politics at play in Tesla’s slump?
The starkest sign that Musk’s close links to Trump and the Republican Party were beginning to drag on Tesla came from California, the Democratic stronghold where the EV maker’s registrations fell in all four quarters last year.
The backlash intensified after the US election in November, as Musk got to work dismantling federal agencies in his role as the government’s efficiency czar and cheered on far-right politicians in Europe.
Musk’s politicking sparked the “Tesla Takedown” movement, whose organizers arranged protests at showrooms globally and called for a boycott of the company’s products and its shares. The EV maker has also dealt with incidents of vandalism and arson.
Musk has acknowledged “blowback” from his involvement in the Trump administration, though he also insisted he’s opened paths to consumers on the political right that could counter the sales he was costing Tesla on the left.
That has yet to show up in the company’s quarterly figures, and now Musk’s ties to Trump have come under strain due to his scorching criticism of the president’s tax bill. With the bromance days in the rearview, Republican lawmakers didn’t spare Tesla when putting the $7,500 tax credit for EV purchases on the chopping block.
As the Trump administration looks to ease fuel-economy and tailpipe-emission standards, Tesla’s billions of dollars in revenue from selling regulatory credits that help other automakers comply with the rules could come under pressure.
Tesla’s Regulatory Credit Sales Soar
Global revenue from selling credits hit a record $2.8 billion in 2024
What is Tesla doing to try to recover?
Musk has assumed oversight of sales in Europe and the US after the departure of longtime confidant Omead Afshar, according to people familiar with the matter.
Afshar’s exit followed a string of senior-level departures this year, including Milan Kovac, the engineering lead for Tesla’s Optimus robot program, and David Lau, who ran software for over a decade.
Musk’s deeper involvement comes at a time when analysts estimate Tesla will fall short of the 1.79 million cars it sold last year. That would stand in contrast with a growing global market, with BloombergNEF forecasting sales of battery-electric vehicles will climb 19% in 2025.
As Tesla’s EV momentum slows, Musk has been hyping up what he sees as the company’s true calling: self-driving cars and humanoid robots. Both endeavors are some way off from starting to “move the financial needle,” as Musk put it during an earnings call in April.
Tesla’s ambition is to have a driverless ride-hailing network that initially uses its consumer vehicle models before incorporating a purpose-built Cybercab, which will have no steering wheel or pedals.
After roughly a decade of predicting Teslas should soon be able to drive autonomously, the company launched its long-awaited robotaxi service in late June.
It was a modest debut, with Tesla only offering rides to a small contingent of fans in a confined area of Austin. Footage of several journeys drew scrutiny from federal safety regulators after the vehicles appeared to violate traffic laws.
The challenge for Tesla now is to scale these operations to prove that its future is indeed in autonomy rather than automaking.
“The central question is, do you believe cars will be autonomous and electric in the future? If the answer is yes, Tesla will pull through and will be in a really good place,” said Gene Munster, managing partner of Deepwater Asset Management.