Tesla deliveries declined 14 percent year-over-year in the second quarter of 2025, continuing a troubling trend for the U.S. EV market leader. As the company reported on Wednesday, Tesla delivered 384,122 vehicles in the second quarter, just shy of Wall Street expectations and down from 444,000 in the same quarter a year ago. The latest figure marks the largest-ever year-over-year decline in deliveries for Tesla, whose shareholders typically expect no less than double-digit growth from the company. After suffering its first annual decline in deliveries last year, Tesla now looks on track to suffer the same fate in 2025.
Tesla currently faces a number of headwinds, as intense competition from China, the Trump administration's rollback of electric vehicle tax credits and its ageing vehicle line-up have significantly worsened the outlook for the company. And that's before taking into account the backlash against CEO Elon Musk and his role in the Trump administration, which hurt Tesla's reputation in parts of the U.S. and across Europe.
As our chart illustrates, there have been remarkably few setbacks in Tesla's rapid production and delivery ramp-up over the past few years. After Elon Musk had unveiled the mass-market Model 3 in 2016, pre-orders quickly exceeded the number of cars Tesla had built in its lifetime, leading to questions of whether the company could actually meet the demand. Last year, Tesla delivered nearly 1.8 million vehicles to customers - 30 percent more than it did between 2012 and 2020 combined.
Elon Musk’s frustration with the recently passed **One Big Beautiful Bill Act**, a key piece of legislation backed by President Donald Trump, boiled over this week as he took to X (formerly Twitter) to publicly criticize the bill. But while Musk vents his political frustrations, investors are increasingly frustrated with Tesla itself, which has once again reported lackluster vehicle delivery numbers.
In Q2 2025, Tesla delivered just over **384,000 vehicles**, a slight improvement from the previous quarter but still marking a **13% drop year-over-year**—the worst quarterly performance in more than two years. This underperformance highlights a broader slump for Musk’s flagship company, which is now facing declining brand favorability and growing competition at home and abroad.
Public Perception Deteriorates
According to data from YouGov, public sentiment toward Tesla has soured significantly in recent years. The percentage of Americans who view the company negatively has more than doubled—from **16.5% two years ago to 35.2% today**—nearly matching the number of people who hold positive views. This shift mirrors a similar decline in Musk’s personal popularity, as many who were previously neutral now report actively disliking him.
Analysts suggest that Musk’s increasing involvement in U.S. politics isn’t helping. Jed Dorsheimer and Mark Shooter of William Blair wrote that Musk’s outbursts over the Senate budget deficit “boiled over” and signaled a return to political distractions, contradicting his earlier pledge to focus on running his businesses. “We only see downside from these actions,” they noted, adding that attention should be directed toward critical projects like the robotaxi rollout.
Deliveries Miss Expectations—but Not by Much
Despite the overall gloom, there are signs of cautious optimism. Tesla’s Q2 delivery figures came in **8% above what analysts at William Blair had predicted**, suggesting some resilience amid the challenges. Dorsheimer and Shooter said they expect the stock to rise as investor fears of an even worse outcome subside.
However, Tesla’s deeper challenge lies not in customer satisfaction among current owners, but in attracting new buyers, according to Forrester analysts. Keith Johnston, group research director at Forrester, explains: “Tesla is a compelling case study in the divergence between customer experience and brand perception. While Tesla remains top-of-mind for many non-customers, they are less likely to perceive it as trustworthy, and even less inclined to buy it.”
Jay Nagley, a consultant at Redspy Automotive Consultancy, adds that Tesla ownership carries a unique social weight: “You can still disapprove of a company and buy its products because nobody knows you’re doing it. But Tesla is visible—you drive it around, your friends see it. It becomes a constant source of potential embarrassment.”
Competition Heats Up in China
Tesla’s struggles are particularly acute in **China**, historically one of its most important markets. In the first half of 2025, Tesla sold **721,000 electric vehicles** in the country, compared to **one million units sold by BYD**, its main rival. BYD’s competitive edge comes from lower prices and cutting-edge features like ultra-fast charging systems, putting pressure on Tesla’s market share.
Still, there are glimmers of hope. Dan Ives, managing director and senior equity research analyst at Wedbush Securities, notes that Tesla saw a rebound in June after eight months of declining sales, driven by strong demand for its updated Model Y. “Deliveries in the region are starting to slowly turn a corner,” he says.
Ives remains optimistic about Tesla’s future, citing the upcoming release of a **lower-cost Model Y** later this year as a key catalyst. However, he also points out that Tesla has been slow to refresh its models—a lag he attributes to Musk’s inexperience with traditional automotive development cycles.
Trump Policies Pose New Risks
Even if Tesla regains momentum with new product releases, it faces a major hurdle in the form of **President Trump’s policies**. The elimination of the **EV tax credit** threatens to make electric cars less affordable, tilting the playing field back in favor of gas-powered vehicles. Additionally, **tariffs on Chinese battery materials** could increase Tesla’s production costs, further squeezing margins.
Musk’s recent decision to step away from his role at DOGE was seen as a move to refocus on Tesla, which Ives calls “the company’s most important asset.” Yet, Musk’s ongoing feud with Trump introduces uncertainty into the equation. “The fear is that the Trump administration may become more hawkish around government-related spending tied to Tesla, especially regulations around autonomous vehicles, which are crucial for the success of robotaxis and Cybercabs,” Ives warns.
While Tesla continues to innovate and maintain a loyal base of customers, it must navigate a turbulent landscape marked by shifting public sentiment, fierce global competition, and unpredictable policy changes. Whether Elon Musk can steer the company through these headwinds will determine not only Tesla’s future but also how history ultimately judges his leadership during this pivotal chapter.