Tesla Inc. reported a significant decline in vehicle sales across Europe in January, with registrations dropping 45% to 9,945 units from 18,161 the previous year, according to data from the European Automobile Manufacturers’ Association. Meanwhile, the broader electric vehicle market in Europe saw a 37% increase in demand, with notable growth in Germany and the UK driven by other manufacturers.

In Germany, Tesla registered just 1,277 vehicles, the lowest monthly figure since July 2021. Sales in France fell 63%, marking the company’s weakest performance there since August 2022. In the UK, Tesla’s registrations declined by nearly 8%, totaling fewer than those of China’s BYD Co. for the first time, despite a 42% expansion in the UK’s EV market.

The sales drop coincided with a challenging period for Tesla’s stock, which fell 8.4% on Tuesday in New York, reducing the company’s market value below $1 trillion. The stock has declined 25% year-to-date in 2025. Tesla is currently transitioning production lines for its popular Model Y SUV, a process Chief Financial Officer Vaibhav Taneja addressed during last month’s earnings call. Taneja noted: “The transition to a new design for the Model Y will cost us several weeks of production.” This shift, alongside potential inventory constraints following a strong sales push late last year, may have impacted January figures. The Model Y is manufactured at four facilities worldwide, including one near Berlin.

Competitors such as Volkswagen AG, Stellantis NV, and Renault SA are gaining ground in Europe’s EV market, supported by stricter EU CO2 emissions targets for 2025 and UK regulations requiring a growing share of zero-emission vehicle sales through 2035. These factors have heightened pressure on manufacturers to meet demand.

Elon Musk, Tesla’s CEO, has faced scrutiny beyond the company’s performance. Mid-January polls by YouGov in Germany and the UK indicated unfavorable views of Musk, linked to his involvement in local politics. On January 9, he hosted a live discussion on X with Alice Weidel, leader of Germany’s Alternative for Germany party, which placed second in a recent election. Later that month, during a virtual AfD rally, Musk said: “Germans should be proud of their culture and not focus too much on past guilt.” The remarks came shortly before the 80th anniversary of Auschwitz’s liberation. In the UK, Musk has criticized Prime Minister Keir Starmer and commented on jailed activists.

Tesla’s challenges reflect a mix of production adjustments and market dynamics, while the EV sector continues to expand in Europe, driven by regulatory demands and rising consumer interest.