Tesla is headed for another year of shrinking sales after it posted a second straight drop in quarterly deliveries, dragged down by CEO Elon Musk’s right-wing political stances and an aging vehicle line-up that has turned off some buyers.
The automaker now needs to deliver over one million vehicles in the typically strong second half to avoid another annual sales decline — a task that some analysts say could prove difficult due to tariff-driven economic uncertainty and threats to phase out key EV incentives under the Trump administration’s sweeping tax bill, including the $7,500 credit on new sales and leases.
It reported on Wednesday that deliveries fell 13.5% in the second quarter, missing analysts’ expectations even after Musk said in April that sales had turned a corner.
Still, shares, down about a quarter this year, rose 4.5% as the drop was less severe than the bleakest analysts views, partly helped by a modest demand recovery in the competitive Chinese market, where its refreshed Model Y has gained some traction.
Some investors welcomed the numbers, though with caution.
“You need two dots to draw a line. I don’t think you can get too excited yet until you have some confirmation (of a demand recovery),” said Camelthorn Investments adviser Shawn Campbell, who personally holds Tesla shares. “We’ve had so much bad news — almost any good news is going to help at this point.”
While Tesla has leaned on offers such as low-cost financing to boost demand, it has yet to roll out long-promised cheaper models in a market where snazzy and feature-packed EVs from its Chinese rivals have been winning over buyers.
Tesla had said it would start producing a cheaper vehicle — expected to be a pared-down Model Y — by the end of June, but Reuters reported in April it was delayed by at least a few months.
An escalating feud between Musk and U.S. President Donald Trump over the tax bill has also worried investors as it could potentially alienate more buyers after Musk’s embrace of right-wing politics eroded demand in Europe and the U.S. and increase regulatory scrutiny of the robotaxis that are central to its nearly trillion-dollar valuation.
MODEL Y OPTIMISM
In the second quarter to June 30, Tesla handed over 384,122 vehicles, down from 443,956 units a year ago. Still, the number marked an increase of 14% from the January-March period.
Analysts expected the company to deliver 394,378 vehicles, according to an average of 23 estimates from Visible Alpha, although projections dropped as low as 360,080 units based on estimates from 10 analysts over the past month.
“While overall deliveries are still down year-over-year, the rate of decline has slowed significantly — indicating a possible bottoming out and even the potential for growth in the second half of the year,” said Sandeep Rao, a senior researcher at Leverage Shares, which also holds Tesla shares.
Tesla in June snapped eight straight months of sales decline in China, a sign that its refreshed Model Y crossover SUV was attracting some buyers despite tough competition from more affordable Chinese rivals such as BYD.
Some analysts said Tesla has benefited from its premium, reliable brand image in China, where local buyers are growing wary of domestic automakers reselling lightly used vehicles as new — a practice known as “zero-mileage used cars.”
Sales also rose in Norway and Spain last month as some buyers turned to the new Model Y in a region where Musk’s politics had sent Tesla sales into a free fall.
(Reporting by Akash Sriram in Bengaluru and Abhirup Roy in San Francisco)
