Elon Musk's Policies Impact Tesla's Sales and Business in Europe

Elon Musk's recent political decisions as an advisor to Donald Trump are already affecting Tesla's sales in Europe. Tesla sold fewer than 10,000 units in Europe last month, a 45% decrease compared to the previous year.

While overall electric vehicle sales in Germany increased by more than 50% year-on-year in January, Tesla's sales plummeted by 60%.

Musk took on a prominent role in the US government as an advisor to Republican President Donald Trump to cut public spending. He has also expressed strong support for far-right political leaders in Europe, including in the recent elections in Germany, which has drawn criticism from some European politicians.

This decline in sales jeopardizes potential revenue from selling credits to other car manufacturers seeking to avoid fines for not meeting the European Union's emissions targets.

European car manufacturers face fines if they fail to meet this year's carbon dioxide reduction targets, although European Commission President Ursula von der Leyen has announced plans to propose relaxing the emissions reduction obligations for the automotive industry, giving manufacturers three years (instead of one) to meet the targets before facing hefty fines for non-compliance. Penalties for non-compliance could reach 16 billion euros across the sector.

Manufacturers selling too many CO2-emitting cars can avoid the fee by partnering with a company that exceeds the EU's requirements. This has been a lucrative revenue source for Tesla's all-electric model.

Since its founding, the electric vehicle company has raised billions of dollars through such schemes. In 2024, it earned $2.76 billion from emissions deals, a 54% year-on-year increase.

This revenue stream is now at risk as consumers across Europe reject the brand after Musk, as an advisor to US President Donald Trump, supported far-right parties and made incendiary comments about Germany needing to move past its Nazi past.

"If things go wrong for Tesla and it doesn't sell enough cars this year, it may not have enough credits for what it promised Stellantis and others," said Peter Mock, executive director of the International Council on Clean Transportation.

Tesla's electric vehicle fleet no longer meets the 2025 emissions targets, according to an ICCT analysis, despite electric vehicle sales increasing by 34% in Europe in January.

In addition to challenges in Europe, Tesla faces strong competition from manufacturers like BYD in China, a key market for electric vehicles.

Chinese car brands registered 37,134 vehicles in Europe in January, a 52% increase compared to the same month last year, while Tesla's sales fell by 45% year-on-year, registering only 9,913 units, according to data highlighted in the latest publication by automotive sector data analysis company, Jato Dynamics.

The data analysis company explains that Tesla's decline in a month when battery electric vehicles (BEVs) performed well can largely be attributed to the upcoming change of its Model Y, as well as the increased involvement of its owner, billionaire Elon Musk, in politics.

"The strong performance of electric vehicles is particularly impressive given the significant drop in sales that Tesla experienced in January," commented Jato Dynamics global analyst, Felipe Muñoz.

Muñoz adds that it is not unusual for sales to drop just before a new generation or updated model is introduced to the market, as the brand reduces production of the existing model in anticipation of the new launch.

"This is likely what Tesla is experiencing before launching the revamped version of the Model Y, after which it can expect to see sales rebound again," he explained.

Although not new to the market, Tesla's Model Y was the best-selling car in Europe in 2023 and the fourth best-selling in 2024.

The latest version of Tesla's Model 3 was launched at the end of 2023 and recorded a 44% decrease in registrations in January 2025. Muñoz added that "the performance of both the Model 3 and Model Y is an indication of Tesla's declining popularity in Europe overall."