Tesla Motors (TSLA.US) is experiencing a sales slump, with electric vehicle deliveries expected to decline for the second consecutive year. CEO Elon Musk has warned that the company may face "several difficult quarters" ahead as U.S. vehicle purchase incentives expire.

Musk bears responsibility for Tesla Motors' predicament. His polarizing political stance has alienated car buyers in key markets, and consumers have not returned to showrooms even after he stepped back from Washington affairs and publicly broke with President Trump. However, Tesla Motors' problems run much deeper than recent consumer boycotts.

While the automaker has redesigned its most popular Model Y, it has yet to launch a more affordable new model to revitalize its product lineup. A cheaper model is expected to debut later this year, but it may not be entirely new – Musk says it will be similar to the Model Y. Such limited product selection leaves Tesla Motors vulnerable to competitors, particularly from China.

Tesla Motors' approximately $1 trillion market valuation indicates that investors remain optimistic. The value they assign to the company is increasingly rooted in Musk's vision of a future filled with autonomous vehicles and humanoid robots, rather than the current reality of human-driven electric cars.

**Tesla Motors Sales Plummet**

First-quarter deliveries fell to their lowest level in nearly three years. This was partly due to the Model Y redesign process, as Tesla Motors suspended production at various assembly plants to retool the SUV's production lines. The company had hoped that the refreshed Model Y would boost second-quarter sales. However, overall deliveries declined 13% year-over-year, contradicting Musk's mid-May claim that sales had "turned around."

According to Musk's own admission, Europe is the company's weakest major market. Data from the European Automobile Manufacturers' Association shows that despite overall market expansion, new Tesla Motors registrations in the region plummeted by more than one-third year-over-year from January to July. Industry-wide pure electric vehicle sales in Europe grew 26%.

Tesla Motors' struggles continued in August, with significant sales declines in Germany, France, and Denmark. Tesla Motors' difficulties have created opportunities for competitor BYD. The Chinese automaker's pure electric vehicle sales in Europe surpassed Tesla Motors for the first time in April, which analysts called a watershed moment. Some predict BYD's global sales will exceed Tesla Motors' for the full year – and BYD hasn't even entered Tesla Motors' home market of the United States.

Cox Automotive estimates Tesla Motors' U.S. vehicle sales declined 11% in the first half. According to its Kelley Blue Book data, Tesla Motors remains the best-selling electric vehicle brand in America, but its share of EV sales has shrunk from over 75% in 2022 to below 50% in 2024.

In China, the world's largest electric vehicle market, Tesla Motors' Shanghai factory shipments (for domestic customers and exports) declined year-over-year in seven of the first eight months of 2025, according to the China Passenger Car Association.

**Tesla Motors Retreats**

Musk maintains a "less is more" strategy for Tesla Motors' product lineup. For years, the company has sold only five models – Model S (launched 2012), Model X (2015), Model 3 (2017), Model Y (2020), and Cybertruck (2023) – and not all models are sold globally.

In contrast, BYD offers many more models, most of which are cheaper than Tesla Motors' best-selling Model Y and Model 3 sedans. BYD also announced in March the development of an electric vehicle battery system that can charge in five minutes, potentially making the brand more competitive.

New entrants are threatening Tesla Motors' position, especially in China's already crowded electric vehicle market, where a prolonged price war continues. The most notable newcomer is Xiaomi, which has entered automotive manufacturing. The company says its second electric vehicle, the YU7, received nearly 300,000 pre-orders within one hour of opening reservations. Priced at approximately $35,000, it's cheaper than Tesla Motors' Model Y.

Sub-$30,000 vehicles have long been viewed as key to Tesla Motors' further growth. However, the affordable vehicle Musk has promised since his first "Master Plan" in 2006 has yet to materialize. Instead, the company has recently launched the expensive Cybertruck pickup, whose sales have fallen far short of the CEO's expectations.

Although the electric vehicle manufacturer told investors in July that "first vehicles of more affordable models" began production in June, with mass production targeted for the second half of the year, the plan prioritizes assembling existing models in Q3 before U.S. EV tax credits expire. There's no news yet on pricing for this low-cost vehicle, and when asked about its appearance, Musk replied it's "just a Model Y."

Relying on simplified cheaper versions of existing models may leave Tesla Motors increasingly behind competitors' more innovative designs. It's unclear whether the company will make major adjustments to its product lineup soon.

**Caught in Political Storm**

The clearest sign that Musk's close relationship with Trump and Republicans is dragging down Tesla Motors comes from California. This Democratic stronghold saw Tesla Motors registrations decline in all four quarters last year. The backlash intensified after November's U.S. election, when Musk took charge of the Department of Government Efficiency to streamline federal agencies and cheered for far-right politicians in Europe.

Musk's political activities sparked a "Boycott Tesla Motors" movement, with organizers arranging protests at showrooms worldwide and calling for boycotts of the company's products and stock. The electric vehicle manufacturer has also dealt with vandalism and arson incidents.

Musk acknowledges his joining Trump's administration brought "backlash" but insists he opened doors to right-wing consumers, which could offset Tesla Motors' sales losses in left-wing camps. This hasn't yet shown in the company's quarterly data, and Musk's relationship with Trump soured after his harsh criticism of the president's tax and spending legislation.

With the "bromance" days over, Republican legislators showed no mercy to Tesla Motors when voting to eliminate the $7,500 electric vehicle tax credit expiring at the end of September. This deadline may provide Tesla Motors a temporary boost as U.S. consumers accelerate EV purchases before the credit expires, but upside potential may be limited by weak sales in Europe and China.

Trump's signature tax legislation also eliminates penalties for automakers failing to meet federal fuel economy standards. This will reduce Tesla Motors' revenue from selling regulatory credits that help other automakers comply with emissions rules. In some quarters, this credit revenue has been crucial for the company to remain profitable.

**Tesla Motors' Path to Recovery**

Tesla Motors has expanded to India, opening its first showroom in Mumbai in mid-July. However, its launch in this emerging EV market has been lackluster – it received just over 600 orders as of early September. Reflecting India's high tariffs on car imports, the entry-level Model Y is priced near $70,000, beyond most drivers' reach in the country.

To regain market share in China, Tesla Motors is making changes to keep pace with competitors' technology-rich vehicles. It plans to launch in-car voice assistant features powered by local AI model DeepSeek and ByteDance's Doubao. It's also launching a six-seat Model Y starting at $47,200, comparable to competing models with three-row seating configurations. Model Y L deliveries may begin in September.

In other regions, Musk has taken over sales oversight for Europe and the United States following the departure of longtime confidant Omead Afshar. Afshar's exit is the latest in a series of executive departures this year, including Tesla Motors Optimus robot project engineering head Milan Kovac and David Lau, who led software for over a decade. North American sales, service and delivery vice president Troy Jones has also reportedly left the company.

Musk's deeper involvement comes as analysts estimate Tesla Motors will fail to exceed last year's 1.79 million vehicle deliveries. This contrasts with global market growth, as BloombergNEF forecasts 2025 pure electric vehicle sales will grow 19%.

**Autonomous Driving and Humanoid Robot Prospects**

As Tesla Motors' electric vehicle momentum slows, Musk has been promoting what he considers the company's true mission: autonomous vehicles and humanoid robots. He has stated that 80% of Tesla Motors' value will ultimately come from Optimus. However, as Musk said in April's earnings call, both autonomous vehicles and bipedal robots are still some distance from beginning to "impact financial metrics."

Tesla Motors' ambition is to build a driverless ride-hailing network, initially using its consumer models, then incorporating a dedicated Cybercab without steering wheel and pedals. After predicting Tesla Motors vehicles should soon be able to drive autonomously for about a decade, the company launched its long-awaited robotaxi service in late June.

Tesla Motors' debut was unremarkable, providing rides to a small group of enthusiasts only within a specific area of Austin. Videos of multiple trips drew scrutiny from federal safety regulators due to suspected traffic violations by the vehicles. In early September, the company began allowing the public to download its autonomous taxi app and join the service's waitlist.

Tesla Motors now faces the challenge of scaling its robotaxi business to prove its future indeed lies in autonomous driving rather than car manufacturing.