Tesla's California EV registrations drop 21.1% in Q2 2025 as tax credits expire and new models absent

Tesla Inc. reported a significant decline in vehicle registrations in California during the second quarter of 2025, with sales dropping over 20% compared to the same period in 2024. This marked the seventh consecutive quarterly downturn in the state, which remains the largest U.S. market for electric vehicles (EVs) and a critical indicator of industry trends. Data from the California New Car Dealers Association (CNCDA) showed registrations fell to 41,138 units in Q2 2025, down from 52,119 in Q2 2024 [14]. Other sources, including AInvest and Seeking Alpha, documented declines ranging from 18.3% to 21.1% during the same period [6][7]. The broader U.S. EV market in California expanded in the first half of 2025, but Tesla’s share of zero-emission vehicle registrations slipped to 18.2%, down from 22% a year earlier [1].

The sustained sales slump has raised concerns about Tesla’s competitive position in the Golden State. Analysts and industry observers cite multiple factors, including waning consumer enthusiasm for Tesla’s product lineup and a shifting regulatory landscape. The company’s updated Model Y failed to stimulate demand despite its recent availability, and its Cybertruck—a polarizing model—has seen only 11,000 units sold year-to-date, according to Cox Automotive. Meanwhile, Tesla has not introduced a new vehicle since the Cybertruck’s 2023 debut. The absence of fresh models coincides with the expiration of a $7,500 federal tax credit for domestically manufactured EVs in September 2025, a key incentive for California buyers [1]. To counteract this, Tesla offered promotions such as free supercharging for Model 3 buyers and complimentary Full Self-Driving feature transfers ahead of the deadline.

Political dynamics have also played a role. California, a predominantly liberal state, has been a focal point for anti-Musk activism, including the Tesla Takedown protest movement. Critics attribute part of the sales decline to buyer discomfort with Elon Musk’s public political stances. Activists plan to rally at Tesla’s retro-themed diner in West Hollywood on July 26, decrying what they view as Musk’s influence on the state’s climate and cultural priorities [1]. Organizers of the protest cited declining sales, weak earnings reports, and broader public discontent with Musk’s political activities as driving factors.

The sales downturn occurs amid broader financial challenges for Tesla. Global vehicle deliveries fell 13.5% year-over-year in Q2 2025, reflecting a second consecutive quarterly decline [1]. The company also faces the end of its regulatory credit program, which has generated over $10 billion in revenue since 2014—nearly a third of its total profit. Musk has called these credits vital to Tesla’s survival, particularly in 2019, but the program ends on September 30, 2025 [1]. Analysts at William Blair questioned the sustainability of Tesla’s credit-driven revenue model, while Reuters warned that aggressive discounts and promotions have yet to yield meaningful sales gains [1].

Tesla’s Q2 earnings report, slated for release after the July 31 trading session, is expected to reflect these pressures. While the company’s global production hit 410,000 units in the quarter, the California market’s decline could weigh on investor sentiment. The broader EV sector is maturing, with hybrid vehicles gaining traction as consumers seek alternatives. Traditional automakers and EV startups are also offering more competitive pricing and product diversity, further complicating Tesla’s position [6].

Despite these challenges, Tesla is pivoting toward AI and autonomous driving initiatives, including its Robotaxi project, to rekindle investor confidence. However, analysts caution that such efforts may not offset near-term sales pressures unless paired with strategic pricing adjustments and product diversification. The company’s ability to regain traction in California—its largest U.S. market—will depend on addressing regional regulatory shifts and evolving consumer preferences.

Source:

[1] [Tesla's car sales in California dropped over 20% in Q2 2025](https://www.mitrade.com/insights/news/live-news/article-3-981223-20250724)

[6] [Tesla California registrations down 21.1% in Q2](https://www.ainvest.com/news/tesla-s-california-ev-sales-slide-18-3-in-7th-consecutive-quarter-as-hybrids-rivals-gain-ground-25071010d34c390cbe4ec483/)

[7] [Tesla (TSLA) Faces Decline in California EV Registrations](https://www.gurufocus.com/news/2996146/tesla-tsla-faces-decline-in-california-ev-registrations-amid-global-sales-drop?mod=mw_quote_news&r=4bf001661e6fdd88d0cd7a5659ff9748)

[14] [Tesla (TSLA) Faces Decline in California EV Registrations](https://www.gurufocus.com/news/2996146/tesla-tsla-faces-decline-in-california-ev-registrations-amid-global-sales-drop?mod=mw_quote_news&r=4bf001661e6fdd88d0cd7a5659ff9748)