Tesla faces declining sales in Europe as local automakers gain ground with affordable EVs, while new EU tariffs impact China-made imports.
Tesla’s European sales plummeted 37% in Q1 2025 as new EU tariffs and delayed production hampered its competitiveness, while rivals like Volkswagen and BYD gained market share with more affordable models, signaling a major shift in consumer preferences across the region.
Tesla’s European downturn amid market transformation
According to ACEA data released June 20, 2025, European EV sales grew 23.9% year-over-year in Q1 2025, but Tesla’s registrations fell sharply by 37%. This decline comes as Chinese automaker BYD saw a 41% surge in sales, fueled by its new Europe-specific ‘Seagull’ hatchback launched on June 18. The €19,999 model secured 28,000 pre-orders within 72 hours, demonstrating strong demand for affordable EVs.
EU tariffs reshape competitive landscape
The EU’s imposition of 22% tariffs on China-made EVs effective June 25 has particularly impacted Tesla, which imports Model 3 vehicles from Shanghai. As noted in the European Commission’s press release, these tariffs exempt BYD’s Hungary-built models, giving the Chinese automaker a significant advantage. Meanwhile, legacy automakers like Volkswagen and Stellantis have gained market share with €25k-€35k models that better align with current consumer priorities.
Production challenges compound Tesla’s woes
Tesla’s Berlin Gigafactory faced a 14-day production halt in early June due to union strikes, delaying Model Y deliveries. The company’s planned expansion of the facility has been postponed to 2026, worsening supply constraints. JATO Dynamics’ June 2025 report reveals that 68% of new EV buyers in Europe are opting for vehicles priced below €40k, highlighting the market’s shift toward affordability over brand loyalty.
Historical context: Tesla’s changing fortunes
Tesla’s current challenges mirror patterns seen in other technology-driven industries where early innovators face intensified competition as markets mature. The company’s 2019-2022 growth surge in Europe, when it captured nearly 20% of the EV market, was fueled by first-mover advantage in premium segments. However, similar to Apple’s experience in smartphones after 2010, Tesla now faces pressure as competitors leverage existing manufacturing networks and local market knowledge.
The European EV market’s evolution follows the trajectory of other technology adoptions where affordability eventually becomes the dominant driver. This pattern was seen in solar panel adoption (2010s) and smartphone penetration (2005-2015), where premium brands initially led but ultimately lost share to value-focused competitors offering comparable functionality at lower price points.
