Tesla’s stock price continues to decline under the impact of multiple factors. On July 7, Tesla’s stock dropped nearly 7% after hours, with its market value evaporating by over $70 billion (approximately ¥500 billion). This sharp fluctuation occurred three days after Musk announced the formation of the “American Party,” a political move seen as a follow-up to his public confrontation with Trump over the “Big and Beautiful” bill.
Dan Ives, a well-known analyst on Wall Street, pointed out that Musk’s recent high-profile involvement in politics has triggered widespread concerns among investors. “Diverting attention from the critical moment of advancing the Robotaxi project could be one of the most unwelcome management decisions Tesla could make,” Ives emphasized in his latest research report.
Currently, Tesla faces multiple challenges: global deliveries have declined for two consecutive quarters, with 384,100 units delivered in Q2 2025, a 13.5% year-on-year decrease compared to last year; core management continues to face turmoil; and the highly anticipated Robotaxi trial operation has not met expectations.
Tesla is under significant pressure, and Musk’s decision to announce the formation of the “American Party” on July 5 has further intensified market uncertainty, leading to a 7% single-day drop in Tesla’s stock on July 7. As of early July, the company’s stock has fallen by approximately 27% year-to-date, making it one of the worst-performing companies among major tech stocks.
Tesla Faces Its Toughest “Triple Hit”
Tesla’s Q2 2025 global deliveries continued to decline, highlighting the severe market challenges it faces.
The latest data shows that the company delivered 384,100 electric vehicles in the quarter, a 13.5% year-on-year drop from 443,900 units last year. This marks Tesla’s first consecutive two-quarter decline in deliveries. In Q1, deliveries were only 336,700 units, the lowest since Q4 2022, with year-on-year and quarter-on-quarter declines of 13% and 32%, respectively.
In the Chinese market, Tesla’s market share has fallen from a high of 15% in 2020 to 7.6%. Although the revamped Model Y briefly boosted sales, the limitations of its single product line have become increasingly apparent in the face of fierce competition from domestic Chinese brands. Companies like BYD, NIO, and Xiaomi are capturing market share with more competitive prices and richer configurations.
The situation in Europe is even more challenging. Tesla’s sales in Europe have been declining for five consecutive months, and its market share continues to shrink. According to data from the European Automobile Manufacturers Association (ACEA), Tesla delivered only 13,863 units in Europe in May 2025, a staggering 28% year-on-year decline, marking the fifth consecutive month of declining sales.
Analysts note that Musk’s perceived support for far-right political parties in Europe, coupled with his close interactions with Trump, has sparked negative reactions from some consumers and media, affecting car purchase intentions.
At the same time, European automakers are accelerating their electrification efforts. Giants like Volkswagen and Stellantis are launching more localized electric vehicle models, while Chinese new energy brands such as BYD and NIO are making significant inroads into the European market with more competitive prices and intelligent configurations, further increasing pressure on Tesla.
Meanwhile, Tesla is also facing internal management turmoil.
According to Bloomberg, the company has recently lost several key executives, including senior vice president Omead Afshar, who was responsible for sales and manufacturing in North America and Europe, and Milan Kovac, head of the Optimus robot project. These frequent changes in key positions have raised concerns among investors about the stability of the company’s governance.
Tesla is also under additional pressure from changes in U.S. new energy policies. The “Big and Beautiful” bill, passed on July 1, will significantly reduce subsidies for the electric vehicle industry, with the $7,500 tax credit for car purchases set to end on September 30.
Industry analysts point out that this policy shift could force Tesla to make a difficult choice between raising prices or squeezing profits. Notably, in Q1 2025, Tesla’s net profit of $409 million was heavily reliant on carbon credit trading income, which amounted to $595 million, underscoring concerns about the profitability of its core business.
The Bumpy Road to Autonomous Driving Commercialization
At the 2024 earnings call, Musk promised to launch an affordable new model in the first half of 2025 to boost sales, but this plan was ultimately replaced by the trial operation of Robotaxi. Musk repeatedly emphasized in investor meetings that this business will reshape the company’s profit model—”vehicle sales are just the starting point, autonomous driving services are the core profit source.”
On June 23, Tesla officially launched the Robotaxi trial operation in the southern part of Austin, Texas, marking the realization of Musk’s self-driving taxi plan that he proposed a decade ago.
The initial trial fleet consists of about 10-20 Model Y vehicles equipped with the latest Full Self-Driving (FSD) system. Users can hail a ride using the Tesla Robotaxi App, with a fixed fare of $4.20 and operating hours from 6 a.m. to midnight. Notably, only influencers, investors, and employees officially invited by Tesla are eligible for trial rides.
To the public’s surprise, each self-driving taxi has a safety monitor in the passenger seat. Additionally, a remote support team is on standby at all times. This became one of the reasons for investor disappointment.
Some investors noted that the presence of a safety monitor means Tesla’s autonomous driving technology still has uncertainties and instability, requiring human intervention at any moment. However, they had expected the vehicles to be fully autonomous, as Musk had consistently promoted and promised that vision.
Musk responded by stating that the safety monitor will be removed “within a month or two,” but this statement failed to quell market concerns. The “dual safeguard” safety setup starkly contrasts with Musk’s long-promoted “fully autonomous driving” vision, leading investors to realize that the technology is far from mature and still requires human intervention to ensure safety.
Even more concerning are multiple videos circulating on social media, clearly documenting Robotaxi’s violations of traffic rules in real-world conditions: including driving into oncoming traffic, crossing double yellow lines to change lanes, speeding, abrupt braking, and random parking. These videos directly undermined market confidence in Tesla’s autonomous driving technology.
These traffic violations have already drawn regulatory attention. The National Highway Traffic Safety Administration (NHTSA) has launched an investigation. Multiple analysts point out that these operational issues not only concern the success or failure of a single project but could also affect Tesla’s overall strategy to transform into a tech-driven mobility service provider.
Jacob Falkencrone, Head of Global Investment Strategy at SAXO, stated: “Tesla’s autonomous driving vision is impressive, but the technical flaws exposed in early operations indicate that achieving this vision still faces huge challenges.”
This trial operation highlights the core contradictions Tesla faces in the commercialization of autonomous driving technology: on one hand, it needs to fulfill its promises quickly, while on the other, it must confront the reality of underdeveloped technology. As competitors rapidly advance in the field of autonomous driving, whether Tesla can resolve these issues in the short term will directly impact its future competitiveness in the mobility services market.
Tesla at a Crossroads
Tesla is currently facing the toughest test in its development history. From declining sales to the underperformance of Robotaxi, from core executives departing to Musk getting involved in political controversies, this once-dominant electric vehicle giant seems to be caught in a “surrounded” situation.
Analysts generally believe that Tesla is at a key strategic turning point. On the one hand, its traditional automotive business is facing growth bottlenecks, with market share constantly being eroded by Chinese and European local brands. On the other hand, its bet on the future of autonomous driving is encountering technical hurdles and regulatory challenges. What is even more worrying is that Musk, as the company’s key figure, has devoted more and more attention to political activities, which has led investors to question his leadership.
Morgan Stanley analyst Adam Jonas stated: “Tesla needs to quickly clarify its strategic focus—whether to continue with an aggressive autonomous driving transformation or return to a more balanced product matrix in automotive manufacturing. Should it maintain Musk’s absolute strategic control, or build a more professional managerial team? These choices will determine Tesla’s future.”
This strategic indecision is already reflected in the capital markets—Tesla’s price-to-earnings ratio has dropped from 70x in 2023 to 25x, showing that investors are reassessing its growth story.
Tesla’s crisis comes amid a global transformation in the electric vehicle industry, as Chinese brands rise and traditional automakers accelerate their efforts. The global electric vehicle market is shifting from “Tesla’s dominance” to a “battle among many players.” In this context, Tesla urgently needs to find a differentiated competitive strategy.
Notably, Tesla still holds several key advantages: leading battery technology, a massive charging network, and loyal brand followers.
How it leverages these advantages to break through the current predicament will be the biggest challenge for Tesla’s management. As the Wall Street Journal once commented: “Tesla’s legend is far from over, but the next chapter may require a new narrative.”
“Tesla’s greatest asset is still its innovation capability,” commented Gene Munster, founder of Loup Ventures, a prominent tech investor. “But innovation requires focus. Should it continue to be a disruptor, or transform into a mature enterprise? This identity issue may be more crucial than any technological challenge.”
As the earnings season approaches on July 23, 2025, all eyes will be on whether Musk can provide a transformation roadmap that convinces the market.