Tesla Promises Affordable Models Amid Falling Sales and Rising Pressures
Tesla says it is moving forward with plans to introduce a more affordable electric vehicle and expand access to its self-driving technology in Europe, as the company grapples with mounting financial and reputational challenges.
In a call with investors, the electric carmaker revealed that early builds of a lower-priced model began in June. The development comes as Tesla reported a sharp 12% drop in revenue and a 16% decline in profits for the second quarter of 2025, driven by a steep 14% fall in vehicle deliveries. It marks the company’s most significant year-on-year revenue decline in over a decade.
The financial update underscores the growing headwinds facing the automaker, including reduced U.S. tax incentives for electric vehicle buyers, intensifying competition from Chinese brands, and lingering concerns over CEO Elon Musk’s political involvement. Tesla estimates that recent U.S. trade policies cost the company $300 million between April and June, with Chief Financial Officer Vaibhav Taneja warning of more potential losses in the months to come.
The company offered no specific outlook for the remainder of the year, citing the unpredictability of global trade and fiscal changes. Nonetheless, Musk remains optimistic about growth opportunities in Europe, pointing to expected regulatory approval of Tesla’s Full Self-Driving (FSD) software – starting, he hopes, with the Netherlands.
“Autonomy is the story,” Musk said during the call. “That’s what will elevate Tesla’s value to extraordinary levels.” He also criticized EU bureaucracy, calling it “Kafka-esque,” but said approvals in multiple European countries remain a target.
Tesla’s margins, once among the industry’s highest, have eroded consistently – declining in five of the last six quarters. Shares in the company are down nearly 30% from their peak in 2024, as investor confidence has been shaken not just by slowing performance, but also by Musk’s increasingly political posture, including his flirtation with launching a new party in the U.S.
In May, concerns escalated to the point where Tesla’s board chair was forced to deny speculation about a potential CEO replacement. Musk’s recent online spats, including a public rebuke of a longtime analyst who urged the board to rein in his political activity, have further rattled investors. One prominent shareholder, James Fishback, even wrote to the board this month asking it to assess whether Musk’s political ambitions align with his responsibilities to the company.
Brand experts say Tesla’s success is no longer guaranteed in a more crowded EV market. “Tesla thrived for years without traditional advertising because of its cult-like following,” said Daniel Binns, global CEO of brand consultancy Elmwood. “But that loyalty is now at risk.”
While the prospect of a cheaper model could help revive interest, Binns warns it’s not a silver bullet. “It will help… but it’s got to be more than just another car,” he said. “The market has caught up.”
