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A 2023 Model X sports-utility vehicle sits outside a Tesla dealership Sunday, June 18, 2023, in Littleton, colo. toggle caption
David Zalubowski/AP
David Zalubowski/AP
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Tesla’s profit dropped 46% year over year,the company revealed in its earnings update Wednesday evening.
That was not exactly a surprise – in fact, it was better than most analysts had expected. Tesla had already reported sales for the quarter, which showed the continuation of a slump that stretched through much of the year. More revenue from other parts of the company, like a growing energy storage business, haven’t made up for the fact that Tesla’s not selling as many cars as it used to.
Tesla, once the undisputed global leader in electric vehicle sales, has lost that crown as its brand reputation has soured and competition – particularly from China – has grown more intense.
But the company continues to maintain that it’s in the process of transitioning from being a car company to a “physical AI company,” with value based on its self-driving vehicle technology, its robotaxi service and, eventually, humanoid robots.
As part of that pivot, Tesla is discontinuing its higher-end Model S and Model X vehicles. The vehicles were already made in much smaller numbers than the more affordable Models 3 and Y, but had symbolic value. The a return to rapid expansion with the launch of a “next-generation” vehicle that was tentatively planned for 2025.
That second growth wave hasn’t materialized. Tesla repeatedly teased a much cheaper Tesla,rumored to sell for about $25,000 thanks to revolutionary changes in manufacturing. Even after Reuters reported that the vehicle was dead, Musk publicly maintained it was coming.
But it wasn’t. Musk eventually confirmed that the company would focus its major redesign efforts on the Cybercab. Instead of offering a significantly cheaper vehicle, the company rolled out slightly cheaper versions of the Model 3 and Model Y.
Sales of electric vehicles in the U.S. are underperforming expectations, and then President Trump took office and his administration began to systematically roll back EV incentives and regulations. Sales of EVs rose sharply in the summer of 2025 as consumers tried to take advantage of a disappearing consumer tax credit, and then dropped when the tax credit expired at the end of September. Automakers say it’s still not clear what demand for EVs will look like without those tax credits.
Trump’s policy changes have affected Tesla even more directly, by taking away a key revenue stream. Under previous government policies, automakers who didn’t meet requirements for making their vehicles cleaner could buy “credits” from competitors who overperformed on building EVs, in lieu of paying fines. This was a lucrative source of cash for Tesla, and one that is now dwindling away. Tesla typically does not respond to requests for comment, and did not reply to an inquiry for this story.
Globally, meanwhile, EVs are still ascendant. In December, in the european Union, buyers registered more new pure EVs than traditional gasoline vehicles for the first time ever. Hybrids (like the original Prius) remain more popular than either, but that market isn’t growing as fast as EVs. In Europe, EV sales increased by more than 50% year-over-year, while those popular hybrids rose only 6%. Traditional gasoline- and diesel-powered car sales dropped by around 20%.
In addition to BYD’s conspicuous success, the major Chinese automaker Geely has boosted its battery-powered vehicle sales by 90% year over year, while competitor SAIC grew sales by 33%.
Those figures include the sales of plug-in hybrids, making them less of an apples-to-apples comparison to Tesla’s pure electric sales — but compared to Tesla’s sales decline, the trajectory is clear. Tesla once had the lead in the EV race, but the momentum is now with Chinese manufacturers.
Brand takes a beating
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Simultaneously occurring, Tesla has been grappling with an increasingly skeptical — or even opposed — consumer base in the U.S.
Musk’s controversial political activities over the last alienated many left-leaning consumers. A growing number are even protesting Tesla’s products.
Musk’s political turn comes at a challenging time for Tesla. Competition in the EV market is heating up, with established automakers and new startups alike launching compelling electric vehicles. And while Musk has won some fans on the right, so far, Republicans and conservatives remain less likely to buy EVs. A few years have alienated many left-of-center Americans. While he won some fans on the right, so far, Republicans and conservatives remain less likely to buy EVs.
Evan Roth Smith is a pollster who has been tracking consumer sentiment about Tesla and EVs for the Electric Vehicle Intelligence Report. according to his most recent survey of more than 3,000 U.S. consumers, nearly all car brands have an overall positive reputation. Toyota ranks at the top: Nearly half of Americans have a positive view of the Japanese brand, and only 7% have a negative view. for Tesla, in contrast, 27% have a positive view and 37% a negative view - the company has more haters than fans.
Tesla’s degree of unpopularity among the general public is very unusual for an automaker, he says: “Most carmakers don’t have any sort of political valence or mass controversy attached to them.”
And brand perceptions affect sales.
Even current Tesla owners, who have long been remarkably loyal to the brand, are showing a little more interest in shopping around. LexisNexis Risk Solutions tracks what brands current car owners purchase for their next vehicle; if they stick with the same brand, that’s evidence of brand loyalty. In their data, Tesla – which has ranked first or second for industry loyalty in recent years - has slipped to third place in 2025.
The company still enjoys higher loyalty than the industry average. But it’s clear that EV buyers have more options now, and even Tesla enthusiasts are more willing to consider them. In 2020, LexisNexis found that among existing Tesla owners who purchased another EV, a remarkable 98% got another Tesla. In 2025, that number dropped to 78%.
Musk’s
Public skepticism regarding the safety and regulatory oversight of Tesla’s autonomous driving technology, particularly its pursuit of robotaxis, is impacting the company’s image, according to recent analysis. This scrutiny stems from concerns about the technology’s readiness for widespread deployment and the adequacy of current regulations.
Tesla, Inc. and the Controversy Surrounding Autonomous Vehicle Development
Tesla, Inc., founded in 2003, is a leading manufacturer of electric vehicles and energy solutions. the company’s ambitious pursuit of full self-driving (FSD) capability has become a central, and increasingly controversial, aspect of its brand identity. The core of the controversy revolves around the deployment of autonomous features and the potential for fully autonomous robotaxis.
The National Highway Traffic Safety Administration (NHTSA) is currently investigating Tesla’s Autopilot and FSD systems following numerous crashes and reports of unintended acceleration or braking. NHTSA’s investigation, initiated in August 2021, focuses on whether Tesla’s systems are adequately designed to prevent misuse and whether sufficient safeguards are in place. As of January 26, 2024, NHTSA had expanded the probe to include 763,000 vehicles.
Example: In December 2023, NHTSA announced it was upgrading its investigation into Tesla’s Autopilot to an engineering analysis, a necessary step before possibly issuing a recall. Reuters reported on this upgrade, highlighting the seriousness of the concerns.
National Highway Traffic Safety Administration (NHTSA) and Regulatory Challenges
The National Highway Traffic Safety Administration (NHTSA) is the federal agency responsible for vehicle safety standards and regulations in the United States. NHTSA faces significant challenges in establishing a comprehensive regulatory framework for autonomous vehicles, balancing innovation with public safety.
developing regulations for autonomous vehicles is complex due to the rapidly evolving nature of the technology. Current regulations were largely designed for human drivers, and adapting them to account for fully autonomous systems requires careful consideration of liability, safety standards, and testing protocols. The agency has issued guidance documents, but a formal rulemaking process for Level 3 and higher automation levels is still underway.
Example: in March 2024, NHTSA released its final rule requiring all new passenger vehicles to have automatic emergency braking (AEB) systems. This rule, while not specific to autonomous vehicles, demonstrates NHTSA’s commitment to enhancing vehicle safety through technology mandates.
Public Perception of Tesla’s autopilot and Full Self-Driving (FSD)
Public perception of Tesla’s Autopilot and FSD features is increasingly cautious, with significant skepticism regarding their safety and reliability. This skepticism is fueled by reports of accidents, concerns about the system’s limitations, and questions about Tesla’s marketing of the technology.
The association of Tesla with the concept of robotaxis, as promoted by CEO Elon Musk, has further polarized public opinion. While some view robotaxis as a promising future of transportation, others express concerns about job displacement, safety risks, and the potential for algorithmic bias. A 2023 survey by the pew Research Center found that 68% of Americans say they would *not* want to ride in a driverless vehicle. Pew Research Center findings indicate a significant level of public apprehension.
Example: Following a March 2024 crash involving a Tesla on Autopilot in California, the California Department of Motor Vehicles (DMV) announced it was seeking to suspend Tesla’s license to manufacture and sell vehicles in the state. The DMV’s notice underscores the regulatory scrutiny Tesla faces and the potential consequences of safety concerns.
