Xiaomi and BYD have finally become Tesla's most serious threats.

Tesla is facing severe challenges.

At Beijing time on July 24th, Tesla released its second - quarter financial report.

Overall, although the significant decline in the first quarter has been halted, compared with the same period last year, there is still an obvious downward trend. Among them, the total revenue dropped to $22.5 billion, a year - on - year decline of 12%; the revenue from the automotive business dropped to $16.67 billion, a year - on - year decline of 16%. Due to the increased investment in the AI business, the free cash flow continued to decline from $660 million in the previous quarter to $150 million.

Although in the second quarter, Elon Musk returned after "resigning" and launched the Robotaxi business in Austin in June. However, Tesla's sales still failed to stop the year - on - year decline. In the United States, after the implementation of the "Big and Beautiful" Act, they will also face more severe challenges on the consumer side. In the Chinese and European markets, domestic brands represented by Xiaomi and BYD have pushed the competition in the electric vehicle market into a deeper red ocean.

At the earnings conference after the release of the financial report, Musk admitted that Tesla "will still go through several difficult quarters", and the pressure mainly comes from the following three aspects:

In the automotive business, affected by the "Big and Beautiful" Act, Q3 will give priority to ensuring the delivery of existing models; the mass production of the highly anticipated "affordable model" will be postponed to Q4.

In terms of autonomous driving, the challenges come from the regulatory level. To promote the Robotaxi business on a large scale across the United States, it needs to go through the layer - by - layer approvals of multiple different departments such as the federal government and state governments.

In the field of robotics, although Musk once again emphasized that the goal is to reach a monthly manufacturing capacity of 100,000 in 5 years, the prototype of Optimus 3, which he described as the "truly correct design" of the robot, will not be mass - produced for another 3 months. Musk also admitted that in the early stage of mass production of the robot, the gross profit margin is likely to be negative.

Whether you think Tesla is just an automotive company or an AI company as Musk claims, this trillion - dollar - market - cap giant has reached another dangerous moment.

01 Sluggish Sales, Xiaomi and BYD Are at the Gates

The performance report shows that in the just - ended second quarter, Tesla's total revenue was $22.5 billion, halting the extremely large decline in the first quarter, but still down 12% year - on - year. Among them, in the most crucial automotive business, Tesla's revenue decreased by 16% year - on - year, and the company's total gross profit margin rebounded to 17.2%.

Core data of Tesla's Q2 2025 performance report | Image source: Tesla

Although Musk's statement that "Tesla is not an automotive company but an AI company" has become tiresome, the automotive business still accounts for 75% of the company's total revenue. The main reason for Tesla's revenue decline is the sluggish sales of its automotive products.

In the second quarter, Tesla delivered a total of 384,000 new vehicles globally. Although this is an improvement compared to the dismal figure of 337,000 in the first quarter, it is still down 13.5% year - on - year.

The most core factor for the decline in sales is the change in consumers' perception of Tesla's brand image in the European and American markets.

For a long time, Tesla could rely on the two "old" models, Model 3 and Model Y, which have been on the market for 8 years and 5 years respectively, to maintain sales volume. Musk's personal image and Tesla's cutting - edge technological brand tone have played a significant role.

However, since Musk got involved in politics at the beginning of this year, his personal image in the United States and Europe has plummeted. In the United States, some people launched the "Tesla Takedown" campaign, and even resorted to extreme ways such as "smashing, vandalizing, and burning" in the street to show their protest. In Europe, although the pure - electric vehicle market increased by 27.2% in May, Tesla's sales have declined for 6 consecutive months.

The efforts of competitors have also put Tesla in a difficult position.

A large part of the electric vehicle market that Tesla has lost in Europe is being taken over by BYD. Data from the European Automobile Manufacturers Association shows that in April this year, BYD's vehicle registrations in the European market have exceeded those of Tesla. It should be noted that this is a result achieved by BYD despite a 27.4% tariff barrier.

In China, according to statistics from "Autohome", the total sales of Model Y in the first half of the year reached 171,000 units, still maintaining the title of the best - selling SUV in the domestic market. However, compared with last year's figure of 480,000 units, it only completed 35.6% of the performance in half a year, which is far from excellent.

Moreover, there is a much more intense competitive environment in China than in Europe. Among them, Xiaomi takes the lead. Since the release of the Xiaomi SU7 last year, it has exceeded Model 3 in the pure - electric sedan market for several consecutive months. The Xiaomi YU7, released in June this year, is directly targeted at Model Y, and the number of orders locked in one day exceeded 240,000.

To some extent, Lei Jun has replicated Musk's approach of using the founder's image to drive electric vehicle sales, but he and Xiaomi seem to be more likable than Musk.

Tesla's strategy to boost sales is divided into two approaches, one high - end and one low - end.

On the high - end side, Tesla plans to launch the long - wheelbase version of the Model YL in the Chinese market in the autumn. According to the announcement from the Ministry of Industry and Information Technology, the new car is 4976mm long and has a wheelbase of 3040mm, and it is a six - seat model. Some media believe that the starting price of the long - wheelbase new car is around 400,000 yuan, which is expected to provide more choices for family users and increase the price of the Model Y product line.

Tesla's long - wheelbase Model Y test vehicle | Image source: Weibo

On the low - end side, Musk once again previewed information about the "affordable new car" at the earnings conference early this morning. Musk said that the appearance of this car is "almost the same as Model Y", and it has already started production at the US factory, with mass production expected in Q4. The media believes that compared with the current starting price of $37,500 for Model Y in the United States, the affordable model is expected to reduce the price to $25,000, becoming a new growth engine for Tesla in the US market.

02 When Will Autonomous Driving and Robotics Start to "Make Money to Support the Family"?

Different from all other automotive companies in the world, Tesla's trillion - dollar market value is not supported by the red - ocean competition in the automotive industry. Most people invest in Tesla, betting on the future of "physical AI" represented by autonomous driving and humanoid robots.

From a technical perspective, it is generally agreed in the industry that Tesla's technology and basic computing power in the field of autonomous driving are at the global leading level. However, the greatest uncertainty of cutting - edge technology is that the early - stage technological advantages cannot be immediately translated into commercial returns. Just like before SpaceX crossed the "desperate situation" in 2008, no one knows when these new businesses will start to make money.

In late June, Tesla's Robotaxi finally started trial operation in Austin, the capital of Texas. It is worth noting that the first - batch of Robotaxis are not the two - door driverless Cybercab unveiled last year, but are provided by the mass - produced Model Y vehicles - the Cybercab has not been officially mass - produced yet. In addition, currently only invited users can experience it, and there is a safety officer in the front row. The one - way fixed fee has increased from the initial $4.20 to $6.90. Therefore, at this stage, it is more like a public display of capabilities and brand building.

Actual test experience of Tesla's Robotaxi: Based on the Model Y, with a steering wheel retained and a safety officer in the front row | Image source: X

Of course, the main reason why Tesla's Robotaxi has not achieved fully driverless operation at once is that it needs to go through the layer - by - layer approvals of various regulatory agencies. At the federal level, the National Highway Traffic Safety Administration is responsible for the "technical review". Only after passing the review can the production scale of the vehicles be increased. At the state level, it also needs to obtain a "business license" issued by each public utility commission to conduct formal commercial operations.

Previously, the market also expected Tesla to launch the software combination of FSD V14 + HW5.0 as soon as possible. Among them, HW5.0 (or AI 5) can significantly increase the on - vehicle computing power to over 2000 TOPS, bringing better safety redundancy. Musk also said before that this is the "last piece of the puzzle" to reach Level 5 autonomy. However, at this earnings conference, Musk did not bring more news about the AI 5 chip.

Currently, Tesla is expanding the service scope of Robotaxi in the Austin area and has plans to expand its business in areas such as California, Arizona, and Nevada. Musk said that he will strive to obtain operating licenses in half of the US states by the end of the year. Those "social skills" that have nothing to do with technology may be the key matters for Musk to communicate and focus on after his return to Tesla.

In the field of embodied intelligence, which is "congenial" with autonomous driving, the R & D and production progress of humanoid robots is even slower.

First of all, the technology has not reached a convergent stage. Musk said that the next - generation Optimus 3 will be the "correct design" of the humanoid robot, and it will take at least 3 more months to produce a prototype of Optimus 3.

Designs of previous generations of Tesla's humanoid robots | Image source: X

At the same time, Musk also pointed out that in the first two years after mass production, the humanoid robot business may be in a state of negative gross profit. However, he still reiterated his confidence that in 5 years, Tesla will have the ability to produce 100,000 humanoid robots per month.

17 years ago, after three consecutive rocket launch failures in one year, Musk's SpaceX obtained a commercial contract from NASA on Christmas Eve, reversing all previous crises at once. Now, the global electric vehicle market is experiencing unprecedentedly fierce competition, and Musk is trying to find a new future for Tesla in the two cutting - edge technologies of autonomous driving and robotics, which only a few people can master. Like SpaceX, this path is full of challenges and opportunities.

This article is from the WeChat public account "GeekPark", author: Cao Siqi, published by 36Kr with authorization.