Iconic car brand suffers worst sales slump in over a DECADE amid ‘rough times' – and pledges to make cheaper models
The electric carmaker reported a whopping 12% drop in revenues over the second quarter of the year.
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Tesla's sales and profits have come in lower than analysts have expected.
The company is now focusing on a new, cheaper model amid rising competition and political backlash with autonomous driving key to future revenue growth, according to CEO Elon Musk.
Musk said the company "could have a rough few quarters" before then.
"I'm not saying we will, but we could - you know, Q4, Q1, maybe Q2 but once you get to autonomy at scale in the second half of next, certainly by the end of next year, I think I'd be surprised if Tesla's economics are not very compelling," he said.
The brand faces strong competition from cheaper electric vehicles, especially in China, as well as a backlash against Musk's former political association with President Donald Trump.
As a result, Tesla said it was looking to ramp up production of a more affordable model in the second half of this year, slower than initially expected.
The company gave no further details but it points toward investor concerns that the appeal of Tesla's range is limited when compared to that of competitors.
The results were the first since Musk and Trump's relationship dramatically ended in June.
Tesla's shares remain almost 18% down over the year to date.
This can largely be explained by a 2025 sales slowdown, Tesla's unique exposure to Trump's trade war and the backlash against Musk's former role in the Trump administration which enacted massive cuts to federal spending.
Customers around the globe have also been put off by Musk's interference in national elections as well as competition from cheaper alternatives to Tesla's EV range.
And despite Musk's departure from Washington, the fallout with Trump has left Tesla exposed to potential retaliation from the White House.
The company's profits are threatened through a potential loss in government subsidies - something threatened by the president.
Tesla had revealed earlier this month that production and deliveries in the last quarter were below what was expected.
Over 384,000 Teslas were delivered during that period which is a 13.5% fall on the same period last year.
It also marks the second consecutive quarterly sales decline.
Tesla said in their quarterly update: "Q2 2025 was a seminal point in Tesla's history: the beginning of our transition from leading the electric vehicle and renewable energy industries to also becoming a leader in AI, robotics and related services.
"Despite a sustained uncertain macroeconomic environment resulting from shifting tariffs, unclear impacts from changes to fiscal policy and political sentiment, we continue to make high value investments while ensuring a strong balance sheet."
The company has also said that it continued to expect volume production of its custom built robo-taxi - the Cybercab - and Semi Truck in 2026.
Much of the carmaker's trillion dollar valuation depends on the success of its robo-taxi service with small trials starting in Texas last month.
But some video footage has since suggested evident driving mistakes.
Musk had previously suggested the service would soon reach the San Francisco Bay area, Nevada, Arizona and Florida depending on regulatory approval.
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