Tesla Sees Steep 13.5% Q2 Delivery Decline as Competition and Controversy Mount

2 July 2025

Tesla reported a sharper-than-expected drop in second-quarter vehicle deliveries, with 384,122 units delivered down 13.5% from 443,956 a year earlier and below the analyst consensus of roughly 394,378 units. The decline, its largest quarterly volume fall in history, reflects intensifying competition from lower-cost electric vehicles, particularly in China and Europe, and a consumer backlash tied to CEO Elon Musk’s political associations.

Tesla attributed part of the delivery shortfall to a temporary production halt as it transitioned to the refreshed Model Y platform, prompting some buyers to delay purchases in anticipation of the updated version. Despite these challenges, shares rose 7% in premarket trading, suggesting investors viewed the result as better than the worst-case forecasts and possibly optimistic about the new vehicle’s potential.

While Tesla continues to lead the U.S. EV market, its share is being pressured overseas. Sales in Europe dropped about 28% in May, and its market share in China fell to just over 7% in the first five months of 2025 down from 10% the previous year and a peak of 15% in 2020. Domestic rivals BYD, XPeng and NIO showed strength, with these manufacturers collectively delivering close to 96,000 EVs in June, compared to Tesla’s approximately 71,600 China-made units.

Politically, Musk’s visible alignment with controversial figures and rhetoric has reportedly disenfranchised some environmentally conscious consumers, further weakening brand affinity among segments that once championed Tesla. In response, Tesla refocused public attention on its pioneering robotaxi initiative. The company recently launched a limited service in Austin, Texas, although vehicle availability remains confined and human monitors are still required inside the cars.

Looking ahead, Tesla is contending with several pivotal pressures. The long-promised mass-market “affordable” Model Y variant has yet to reach production, following a delay of several months . Analysts caution that to return to growth this year Tesla must deliver more than one million vehicles in the second half an ambitious target that underscores how critical the new models and autonomous vehicle strategy are for maintaining momentum.

Meanwhile, investor focus remains sharply trained on measures to counter declining international sales. Price cuts are being considered for some markets, though the company appears hesitant, preferring to maintain margin integrity. Rivals like Xiaomi are rapidly gaining ground with competitively priced, feature-rich EVs such as the new YU7 SUV and SU7 sedan, further intensifying the threat to Tesla’s dominance.

With Tesla’s global sales having fallen for two consecutive years, the automotive world is watching closely. The refreshed Model Y’s performance, the delayed affordable variant, evolving pricing tactics, and the ambitious rollout of robotaxis all loom large over the company’s ability to reverse its trajectory and validate the trillion-dollar legacy built under Musk.