TESLA SALES FALL SHARPLY AS ELON MUSK BETS ON AUTONOMOUS DRIVING AND POLITICAL BRINKMANSHIP

Tesla’s global vehicle sales fell for the second straight quarter, continuing a downward trend that reflects growing competition, stagnant product offerings, and a strategic pivot away from car sales and toward autonomous driving technology. The company reported Wednesday that it delivered 384,000 vehicles in the second quarter of 2025, down 13.5 percent from the 444,000 delivered during the same period last year, the New York Times reported.

Despite the decline, Tesla’s share price rose in early trading, signalling that investors remain focused on the company’s future in driverless vehicle technology rather than its current sales performance.

Robotaxis over refreshes

Elon Musk, Tesla’s chief executive, has minimized the importance of lagging sales, repeatedly saying that the company’s long-term value lies in its pursuit of full autonomy. Last month, Tesla began offering paid rides in specially equipped Model Y “Robotaxis” to select guests in Austin, Texas. The test riders, many of them social media influencers, gave glowing reviews—but footage of the rides showed the vehicles making sudden stops, struggling to identify drop-off points, and requiring frequent human intervention.

In a dramatic demonstration last week, a driverless Tesla completed a half-hour journey from the company’s Austin factory to a customer’s home. Musk celebrated the event on X as a breakthrough. But critics pointed out that the vehicle parked in a clearly marked fire lane, raising questions about the system’s real-world readiness.

Aging lineup and falling sales

Tesla’s current model lineup—anchored by the Model Y, Model 3, and aging Model S and X—has struggled to compete against a wave of newer electric vehicles from Chinese companies like BYD and legacy automakers such as Volkswagen and GM. European registrations of new Teslas dropped 28 percent in May, while second-quarter US sales fell 21 percent, according to Cox Automotive.

The company has yet to unveil a prototype of its long-promised low-cost model, which Musk said would begin production by mid-year.

Meanwhile, production of the Cybertruck, Model S, and Model X remains well below capacity. Of the 56,000 vehicles Tesla could theoretically produce in these categories each quarter, only 13,400 were made in Q2.

Underused factories, overextended bets

Tesla’s factories in California, Texas, China, and Germany can build 2.35 million vehicles annually—roughly 590,000 per quarter—but operated at only 70 percent capacity in Q2. In Q1, capacity utilization had been even lower at 62 percent.

Underutilization is a costly problem, particularly for Tesla’s highly automated production lines. “You can’t lay off machines,” said Ferdinand Dudenhöffer, director of the Center Automotive Research in Germany. “You have to keep paying them even when you’re not using them.”

The company would have posted a loss last quarter if not for $447 million in revenue from selling regulatory credits. That lifeline may vanish soon, as the Trump administration moves to eliminate clean air subsidies and pollution credit trading.

Politics, polarization, and brand damage

Musk’s outspoken political activity has also drawn scrutiny. His public alignment with President Trump and right-wing causes has alienated many environmentally conscious consumers, who historically formed Tesla’s core customer base. Now, as he spars with Trump over a policy bill that would slash federal support for electric vehicles and solar energy, the political backlash is growing on both sides.

Musk has threatened to bankroll primary challengers to Republican lawmakers who back the bill. Trump, in turn, has threatened to strip all subsidies from Musk’s companies.

It remains unclear whether Musk’s feud with the White House will rehabilitate his image among liberals—or simply deepen the perception that Tesla is no longer the default brand for progressive consumers.

Investor faith, for now

Despite falling sales, many investors continue to bet on Tesla’s long-term prospects in artificial intelligence, robotics, and autonomous driving. The company’s market capitalization remains near $940 billion, even as its stock is down about 20 percent this year.

Whether that optimism holds will depend on whether Musk can turn his robotaxi vision into a viable business—or whether slumping sales, political isolation, and underused factories will pull Tesla further off course.

2025-07-04T08:15:50Z