Tesla’s vehicle sales have continued to decline for the second straight quarter, sparking concerns about the company’s ability to maintain growth in an increasingly competitive electric vehicle (EV) market, even though its shift towards autonomous vehicles is being seen as a positive move.
Despite the drop in deliveries, Tesla’s share price has seen a rise. This signals that investors are banking on the company’s future in autonomous driving technology.
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| The Tesla driverless Robotaxi is seeing initial glitches and may require human intervention -- Photo: The Robot Report. |
Tesla’s declining sales: A trend in Q2 of 2025
Tesla reported delivering 384,000 vehicles in Q2 2025, marking a 13.5 per cent fall from the 444,000 vehicles sold in the same period last year.
This squeeze in sales is part of a larger trend that points to growing competition in the EV market, especially from Chinese automakers like BYD and established brands such as Volkswagen and General Motors.
In Europe, Tesla saw a 28 per cent drop in registrations in May, while US sales for Q2 fell by 21 per cent, according to data from Cox Automotive.
Elon Musk’s focus on Robotaxis, autonomy
Tesla chief executive officer (CEO) Elon Musk has started rolling out “Robotaxis”— specialised Model Y vehicles designed for autonomous driving.
These taxis in the US are currently being tested with select guests in Austin, Texas, including social media influencers.
While the early feedback has been positive, some of the footage shows the vehicles having difficulties, such as making sudden stops, struggling to identify drop-off points, and requiring human intervention in some situations.
A recent demonstration showed a driverless Tesla completing a 30-minute trip from the Austin factory to a customer’s home.
While Musk celebrated this as a breakthrough, critics said the system isn’t ready yet for widespread use.
Ageing model lineup, competitive pressure
Tesla’s current lineup — comprising the Model Y, Model 3, and the aging Model S and Model X — has started to show its age, especially when compared to newer EVs from competitors.
Sales of Tesla vehicles in the US have seen a significant slump, with second-quarter figures down by 21 per cent.
Tesla is yet to unveil its promised low-cost model, which Musk initially promised would go into production by mid-2025.
This is further delaying Tesla’s entry into the mass-market EV segment.
Production of high-demand models like the Cybertruck, Model S, and Model X remains sluggish, with only 13,400 units produced in Q2 out of the 56,000 Tesla could potentially make per quarter.
Overcapacity and underused factories
Tesla’s global production facilities are capable of manufacturing 2.35 million vehicles annually, that is around 590,000 per quarter.
However, Tesla’s factories operated at just 70 per cent of capacity in Q2. This under use of factories is problematic and may hit profitability.
In Q2, Tesla relied heavily on selling $447 million in regulatory credits to stay in the green.
However, with the Donald Trump administration potentially eliminating clean air subsidies and pollution credit trading, this revenue stream may soon disappear.
Political backlash and brand damage
Musk’s outspoken political views have added to Tesla’s challenges.
His public support for former President Trump and his right-wing positions had alienated many of Tesla’s environmentally-conscious customers.
Investor confidence in Tesla’s future
Despite the dip in sales, investors remain optimistic about Tesla’s future in artificial intelligence (AI), robotics, and autonomous driving technology.
The company’s market value still hovers around $940 billion, although its stock price has fallen by 20 per cent this year.
E-Vroooom’s views
Tesla may be facing declining sales in its bid to shift towards autonomous vehicles, but if the Robotaxi vision is turned into a profitable reality, it may save Tesla from getting derailed.
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