Tesla’s car sales in California dropped over 20% in Q2 2025

In Q2, Tesla saw registrations in its largest U.S. market tumble by over 20%, marking a seventh straight quarterly drop in the Golden State. The company’s retro‑themed diner in California may be drawing record crowds, but the automaker’s core business is cooling off.

This represents Tesla’s seventh straight quarterly downturn in California, the country’s top electric‑vehicle region, even as the broader market for new cars in the state expanded during the first six months of the year, per Business Insider.

Dealership representatives cautioned that Tesla’s slump is dragging down California’s zero‑emission segment, where battery‑powered models constituted just 18.2% of new sign‑ups in Q2 2025, a decrease from 22% a year earlier.

Observers attribute part of the slowdown to buyer discomfort with CEO Elon Musk’s prominent political involvement. It’s worth noting that California, a predominantly liberal state, was the initial hub for the Tesla Takedown protest movement.

Tesla is scheduled to publish its Q2 financial results after Wednesday’s trading session. In early July, the automaker reported a roughly 13.5% decrease in deliveries from the prior year, its second consecutive quarterly dip worldwide.

Although an updated Model Y reached dealers in recent months, it failed to stimulate demand. Tesla hasn’t introduced a new lineup since the Cybertruck debut in 2023, and sales of that divisive truck stand at only 11,000 units year‑to‑date by Cox Automotive’s count.

Tesla’s federal tax credit set to expire

The removal of a $7,500 federal incentive for domestically manufactured EVs in September poses another hurdle.

Tesla introduced perks such as complimentary supercharging for Model 3 buyers and gratis Full Self‑Driving feature transfers to boost purchases before the incentive expires.

Even with intermittent gains in its share value, Tesla faces mounting global challenges, and a vital source of income is on the verge of disappearing. The regulatory credit scheme, which enables conventional auto manufacturers to purchase emissions offsets from EV producers, ends on September 30.

Over the past ten years, this arrangement has generated over $10 billion in revenue for Tesla, roughly a third of its total profit, and it was the primary contributor to Tesla’s earnings in Q1 2025.

Musk says those credits kept Tesla afloat and even stopped it from going bankrupt in 2019.

However, President Trump’s recent “One Big Beautiful Bill” removed the EV mandate, backed more consumer options, cut the credit program, and ignited a public feud with Musk.

William Blair analysts have questioned the longevity of this credit‑driven boon.

Reuters has cautioned that criticizing Trump alone won’t save Tesla, and the automaker’s recent discounts and promotions have yet to generate noticeable gains.

Tesla officially launched its retro-themed diner in West Hollywood on July 21. The spot offers large outdoor screens for drive‑in movies, dozens of Supercharger stations, and an Optimus robot that hands out popcorn.

Anti-Musk activists plan July 26 protest at Tesla diner

Activists from the Tesla Takedown campaign plan to rally outside on July 26 to voice their opposition.

Action Network, which helps coordinate the protests, describes Musk’s new venue as evidence of “[Elon Musk] wants to celebrate his reign of terror in OUR CITY, Occupied Los Angeles, with a cheesy Tesla‑branded diner exclusively for his legion of conmen stock‑pumpers and MLM influencer tryhards?” and closes with “WE SAY HELL NO.”

Organiser Joel Lava told The Verge that the movement remains active despite a dip since spring and expects “a large crowd” outside the diner this Saturday.

“I think it’s safe to say that Elon Musk is not a popular figure in West Hollywood. So I don’t think it’s going to be hard to protest it,” he told The Verge.

Each week, about two dozen people still gather at Tesla sites in Los Angeles, rallied by news of falling sales, a weak earnings report, and reports that DOGE cuts left USAID food to spoil in storage. Rumours of a Musk political party have spurred protesters.

“Yes, our numbers have dwindled, but they have stayed strong,” Lava said. “Tesla funds fascism. By giving money to a $300 billion man, you help destroy the fabric of our country. That’s why you shouldn’t go into this cafe.”

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