Tesla looks to cheaper model as revenue suffers worst drop in over a decade

Tesla has started limited production on a cheaper model in a bid to boost sluggish demand after revealing its worst slump in quarterly sales for over a decade.

The electric carmaker, effectively run part-time by founder and CEO Elon Musk for much of this year after his now-defunct spell at the heart of Donald Trump's government, reported a 12% drop in revenues over the second quarter of the year. Its update showed a total of $22.5bn sales, despite aggressive discounting and low-cost financing put in place to help shield Tesla from many headwinds.

They include strong competition from cheaper electric vehicles and a backlash against Musk's former political alignment with the president. Sales and profits came in lower than analysts had predicted.

Tesla said it was looking to ramp up production of the more affordable model during the second half of this year. It gave no further details but it is a nod to investor concerns that the appeal of Tesla's range is restricted when compared to that of competitors.

The results were the first for shareholders to digest since the so-called bromance between Mr Musk and Donald Trump ended acrimoniously in June. Tesla's shares remain almost 18% down over the year to date - lagging a recovery among rivals - and were flat in extended trading.

The drag can mainly be explained by the 2025 sales slowdown, Tesla's particular exposure to the president's trade war and the often violent backlash against Musk's former role in the Trump administration which enacted big cuts to federal government spending. Globally, customers have been put off by interference by Musk in national elections, particularly in Germany, and stiff competition from cheaper alternatives to Tesla's electric car ranges.

While his departure from Washington allowed the tech tycoon to focus more on his vast business ventures, his beef with the president over the cost of the Big Beautiful tax and spending Bill has left Tesla exposed to retaliation from the White House. Recent analysis by Sky News showed the extent to which the company's profitability is threatened through the potential loss of billions of dollars in government subsidies - a sanction threatened by the president.

The latest set of results showed a steady income from these so-called regulatory credits, amounting to $435m between April and June. That was down from the $458m reported for the same period last year.

Tesla had revealed earlier this month that production and deliveries covering the quarter were below expectations. A total of 384,122 Teslas were delivered in the period, a 13.5% fall on the same period last year.

It marked the second consecutive quarterly sales decline and was not helped by the changeover to the refreshed Model Y. Read more:Tesla shares sink as Musk launches political partyTesla deliveries miss target again One other thing investors were eagerly awaiting news on was the supervised self-driving Robotaxi trial - launched last month in Texas.

Videos have since suggested some evident driving mistakes. Musk has previously said the service would soon reach the San Francisco Bay area, depending on regulatory approvals, and no update was given on whether papers had yet been filed.

Bloomberg News reported earlier on Wednesday that the company was in talks about operating a Robotaxi service in Nevada..