Tesla Sales Plunge Across Europe Despite Model Y Update Amid Regulatory Hurdles

Tesla registrations tumbled in several European countries in July, even after the company introduced a refreshed Model Y, as CEO Elon Musk’s political stance, stricter regulations, and intensifying competition weigh on demand. This downturn highlights broader challenges for the electric vehicle giant in a market shifting toward affordable rivals, reports Reuters.

Sharp Declines in Major Markets for Tesla

Registrations of new Tesla cars, which closely track sales, dropped sharply year-on-year in July across key European nations. In Sweden, they fell 86% to 163 vehicles, marking a seventh consecutive monthly decline. Denmark saw a 52% decrease to 336 cars, while France experienced a 27% drop to 1,307 units. The Netherlands registered a 62% plunge to 443 cars. These figures reflect a persistent slump, with Tesla sales already down by over a third in Europe during the first half of 2025.

This pattern contrasts with overall car market growth in most of these countries. Denmark’s total sales rose 20%, Sweden’s increased 6%, and the Netherlands saw a 9% uptick. France, however, bucked the trend with an 8% slide in overall sales. Such disparities suggest Tesla-specific factors are at play, beyond general economic conditions.

Model Y Refresh Fails to Reverse Trends

Tesla rolled out updates to its flagship Model Y to boost appeal, but results varied widely. The company began selling a long-range four-wheel-drive version in Europe in March 2025, followed by two rear-wheel-drive variants in May. Despite these changes, Model Y registrations in Sweden plummeted 88%, and Denmark recorded a 49% drop.

Norway offered a brighter spot, where Model Y registrations surged more than fourfold to 715 cars. This growth aligned with Tesla’s overall 83% increase in registrations to 838 vehicles in the country. Norway, where nearly all new cars are fully electric and Tesla has led sales since 2021, benefited from the automaker’s introduction of 0% interest loans in some Nordic regions starting in May. These incentives spurred orders, demonstrating how targeted promotions can influence demand in mature EV markets.

Spain also showed gains, with Tesla registrations up 27% to 702 cars, amid a 155% jump in overall electrified vehicle sales, including battery electric and plug-in hybrids. This raises questions about regional differences in consumer preferences and policy support.

Regulatory Barriers Hamper Self-Driving Features

Elon Musk pointed to Europe’s stringent automated driving rules as a key obstacle. He noted that these regulations complicate sales of the Model Y, where optional supervised self-driving serves as “a huge selling point.”

Musk told analysts, “Our sales in Europe, we think will improve significantly once we are able to give customers the same experience that they have in the U.S.”

Tesla faces delays in deploying advanced features globally. In the U.S., the company launched a trial robotaxi service in Austin, Texas, in June using about a dozen Model Y SUVs powered by autonomous software. However, expansion stalls due to pending permits. In Europe, similar hurdles limit the appeal of Tesla’s tech edge, potentially alienating buyers who prioritize cutting-edge autonomy.

Competition Intensifies from Chinese Rivals

Tesla’s aging lineup encounters growing pressure from low-cost electric vehicles, particularly from China. In Spain, Chinese competitor BYD sold 2,158 cars in July—nearly eight times its volume from the previous year—outpacing Tesla significantly. This surge underscores how affordable imports are capturing market share in price-sensitive segments.

European automakers like Volkswagen, Mercedes-Benz, Stellantis, Renault, and BMW have reported weak second-quarter results, citing U.S. import tariffs and softening demand. These trends signal a competitive landscape where Tesla must navigate external trade pressures alongside internal product delays.

Outlook Amid Upcoming Changes

Musk acknowledged potential difficulties ahead, stating Tesla could face “a few rough quarters.” With no lower-priced models arriving until the final three months of 2025—delayed from initial plans—and the impending expiration of a $7,500 U.S. tax credit for EV buyers, the company braces for continued headwinds.

Production of a new, cheaper model will ramp up next quarter, which could help reclaim momentum. In Norway and Spain, positive outliers indicate that strategic adjustments, like financing deals or market-specific incentives, might mitigate broader declines. As other European countries release July data, a fuller picture will emerge, but Tesla’s path forward depends on resolving regulatory issues and accelerating affordable offerings to counter rivals.

Photos courtesy of X