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- With sales dropping 13% in the first quarter and the company losing 71% of its value, the electric vehicle pioneer is facing unprecedented challenges.
- Of the four main models in its lineup (excluding the niche Cybertruck in the US market), the Model S and Model X have been begging for replacements for years.
- In May 2025, BYD achieved a historic milestone by selling more electric vehicles in Europe than Tesla for the first time.
2025 is turning into a year Tesla would rather forget. With sales dropping 13% in the first quarter and the company losing 71% of its value, the electric vehicle pioneer is facing unprecedented challenges. What’s behind this dramatic downfall? Let’s dive into the factors pushing the once-untouchable EV leader to the brink.
The political adventure that backfired
When Elon Musk joined Donald Trump’s administration to head the Department of Government Efficiency (DOGE), tasked with eliminating wasteful government spending, many Tesla fans were shocked. The disconnect between Musk’s environmental advocacy and Trump’s policies sparked the Tesla Takedown movement, which quickly spread across America and internationally.
Adding fuel to the fire were Musk’s controversial gestures during public appearances and his support for far-right political parties in Europe. His popularity plummeted so dramatically that he eventually abandoned his political position to return to Tesla’s rescue.
The final straw came when Musk openly opposed Trump’s fiscal plan, the One Big Beautiful Bill Act, which would add approximately $3 trillion to the national debt. After a heated dispute with Treasury Secretary Scott Bessent that reportedly became physical, Musk left the administration and began trading public insults with the President on social media platforms.
An aging vehicle lineup
Politics aside, Tesla’s product lineup has grown stale. Of the four main models in its lineup (excluding the niche Cybertruck in the US market), the Model S and Model X have been begging for replacements for years.
The bestselling Model 3 and Model Y have received updates focused on aesthetic changes and improved finishes, but they’ve fallen behind as competition intensifies. While still offering excellent range, these vehicles now seem dated compared to fresh offerings from European and Chinese manufacturers.
Tesla also lacks smaller, more affordable models that could compete with vehicles like the BYD Dolphin Surf. The long-rumored Model 2 that would target this market segment has yet to materialize despite years of speculation.
The Chinese EV invasion
When Tesla first emerged as a dedicated electric vehicle manufacturer, it had virtually no competition. That landscape has drastically changed. European automakers have invested billions in electric mobility, but the real threat comes from Chinese brands that are rapidly eating into Tesla’s market share.
BYD exemplifies this challenge. The Chinese manufacturer delivered 4.27 million vehicles in 2024 compared to Tesla’s 1.79 million. Though BYD’s pure electric sales (1.76 million) were slightly below Tesla’s, the Chinese company surpassed Tesla in revenue, reaching $107 billion versus Tesla’s $97.69 billion – a difference of approximately $9.3 billion.
In May 2025, BYD achieved a historic milestone by selling more electric vehicles in Europe than Tesla for the first time. While Tesla’s monthly volume dropped 49% year-over-year, BYD registered a 169% increase. When including plug-in hybrids (which Tesla doesn’t offer), BYD’s registrations skyrocketed by 359%.
The rare earth advantage
Chinese manufacturers enjoy significant advantages that allow them to undercut Tesla on price. They control their entire production chain from start to finish, with companies like BYD manufacturing their own batteries and components.
This control extends to raw materials – China holds 70% of rare earth mining rights and handles 90% of processing for these critical battery materials. Unlike Tesla, Chinese firms don’t depend on third parties, allowing them to substantially reduce final product costs.
Tesla’s only response has been aggressive discount campaigns and promotions, which investors view as a sign of weakness. (And let’s be honest, when you’re selling premium-priced vehicles at steep discounts, it doesn’t exactly scream financial health.)
As 2025 unfolds, the question remains: can Tesla reverse its fortunes, or will Chinese manufacturers continue their electric takeover of the market Musk once dominated?
