Tesla: Revenue Drops and the Urgency for a More Affordable Car

With sales down 23% in the first half of 2025 and revenues collapsing, Tesla is making promises of change.

Tesla published its financial results for the second quarter of 2025 on Wednesday, July 23, confirming the growing concerns about the California giant’s trajectory. With a 12% year-over-year revenue decline to $22.5 billion, Elon Musk’s company is experiencing its worst revenue drop in over a decade.

Amid competitive pressure, loss of government support, and dwindling sales, Tesla finds itself at a turning point in its history, where the launch of a smaller, more affordable vehicle is no longer a strategic option but a vital necessity.

Results in sharp decline

The numbers are undeniable. Despite a net profit of $1.17 billion, it is down 16% from last year. Operating income has collapsed by 42% to just $0.9 billion, while vehicle deliveries dropped by 14% with 384,000 units sold.

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This underperformance has the same sources: Elon Musk’s pivot into politics, his divisive ideas, and of course, the trade war initiated by the United States with the rest of the world. In China and Europe, resentment is very strong, and sales are drastically decreasing.

Adding to this is increasingly mature and affordable competition, creating an explosive mix. The impending end of federal subsidies in the United States is expected to hit even harder in the second half of 2025.

Musk as a victim?

Elon Musk did not mince his words during the conference with analysts. He denounced the “headwinds” created by the reduction in U.S. government support for electric vehicles, as well as regulatory pressures on companies deemed close to his galaxy.

For someone who has spent the last few months denouncing the cost of government assistance to businesses, this statement is rather amusing…

In light of this reality, Elon Musk has officially accelerated the project of a new, smaller, and less expensive electric vehicle, with production expected to start by the end of 2025. “It will be a completely new model, halfway between a compact and a crossover, benefiting from the learnings of the Model Y platform, with drastically reduced production costs,” Musk specified.

A car priced at 30,000 euros on the way

Production is expected to take place in Austin (Texas) and Berlin (Germany), with a target price of $25,000 in the U.S. There, the price is listed without VAT, so the final price in Europe should be around 30,000 euros in the base version. Still too expensive?

Tesla indicates that a Robotaxi version, with no pedals or steering wheel, will also be offered. Autonomous driving is Elon Musk’s main battle horse, but there are still many regulatory barriers, especially in Europe. In Europe, customers still enjoy driving…

This pivot marks a fundamental change in Tesla’s strategy. Previously focused on the high-end market, the brand must now fully enter the mass segment, where volumes and growth are, but also fierce competition.

Despite these disappointing results, Tesla remains financially healthy, with $36.8 billion in cash. However, its free cash flow has shrunk to only $100 million. The company continues to walk a tightrope between massive investments and an urgent need for profitability.

The imminent launch of a compact and accessible vehicle proves that even for Tesla, innovation alone is no longer enough: it must now convince again… and above all, sell!