Tesla’s California Sales Plummet Over 20% in Q2 2025: Musk’s Politics, Expiring Credits, and Protests Fuel the Decline
- Why Did Tesla’s California Sales Crash Again?
- How Are Expiring Incentives Hurting Tesla?
- Is Musk’s Diner a PR Win or a Target?
- Can Tesla Recover Without Regulatory Credits?
Tesla's California sales nosedived by over 20% in Q2 2025, marking its seventh consecutive quarterly drop in the EV giant’s most critical market. The slump coincides with expiring federal tax credits, Musk’s polarizing political stance, and growing protests—including a planned demonstration at Tesla’s new retro diner. Meanwhile, regulatory credits, a lifeline for Tesla’s profits, vanish in September, leaving analysts skeptical about its path forward.
Why Did Tesla’s California Sales Crash Again?
For the seventh straight quarter, Tesla’s deliveries in California—the epicenter of U.S. EV adoption—fell sharply, dropping over 20% year-over-year in Q2 2025. Battery-powered models accounted for just 18.2% of new registrations, down from 22% in 2024. Dealers blame Musk’s divisive political activism, with one noting, “Liberals here see his tweets as a dealbreaker.” The state, where Tesla once dominated, now hosts the “Tesla Takedown” movement, which plans protests at the company’s West Hollywood diner this weekend.
How Are Expiring Incentives Hurting Tesla?
Come September, Tesla loses two cash cows: the $7,500 federal EV tax credit and its regulatory credit program, which generated $10B+ over a decade (a third of total profits). In Q1 2025, these credits were Tesla’sprofit driver. Trump’s recent “Beautiful Bill” axed the EV mandate, slashing credit revenue. To offset the loss, Tesla offered free Supercharging and Full Self-Driving trials—but deliveries still fell 13.5% globally in Q2. “Discounts can’t fix structural problems,” warns a BTCC analyst.
Is Musk’s Diner a PR Win or a Target?
Tesla’s July 21st diner launch—complete with Superchargers, drive-in movies, and a popcorn-serving Optimus robot—was overshadowed by activists. The “Tesla Takedown” group vows to protest on July 26th, calling the venue “a shrine to Musk’s ego.” Organizer Joel Lava told, “Funding Tesla means funding fascism.” Weekly anti-Musk rallies in LA have drawn crowds since spring, fueled by layoff rumors and weak earnings.
Can Tesla Recover Without Regulatory Credits?
With credits gone by September, Tesla faces a $3B+ annual income hole. Its aging lineup (no new models since Cybertruck’s 2023 debut) struggles against fresher rivals. Model Y updates failed to spark demand, and Cybertruck sales remain niche. “Tesla survived 2019 on credits,” notes William Blair. “Now? It’s uncharted territory.”
