Is Tesla's Downward Spiral Over?

Not exactly…

Photo by Mateusz Zatorski on Unsplash

For the past year and a bit, we all stood around, almost gleefully watching Mr DOGE’s sales figures plummet. It felt like karma for this oligarchic edgelord’s political machinations, like there was some vague sense of justice in this messed-up world. Many others, including myself, called this downward spiral the death of Tesla because, in truth, this wasn’t just down to Musk’s bad PR but a chronic mismanagement of the company, causing it to lose its lead, stagnate, and fall behind the competition in many ways. After all, Tesla is but a shell of what was once promised. But, over the past few months, Tesla’s sales have suddenly shot up. Is this a rebound? Is Tesla recovering? Is Tesla still doomed? Is it on track to meet the colossal targets that have justified its insane sky-high stock price? Is the proverbial egg on my face? Well, let’s find out.

I want to give credit where credit is due. Tesla’s recent sales rally is damn impressive, particularly when you consider the current political environment of its main markets. The FT reported that Tesla delivered 480,126 vehicles in 2026 Q2, smashing its 404,000 prediction. That is 24.99% growth year-over-year and is the best Q2 delivery in Tesla’s history(though still approximately 10,000 short of the best quarter ever). This is no guarantee that 2026 will be a good overall sales year for Tesla; Q2 has historically been quite a variable period for the company. Also, the vast majority of this sales growth happened in Europe and China, and this locality could make this sudden growth short-lived. However, growing sales in Europe, considering the entire continent is beginning to turn on US hegemony and its tech oligarchs like Musk, is remarkable. Whatever the sales and PR teams are doing, it’s working.

Tesla brown-nosers have used these sales figures as evidence that Tesla isn’t dying and that critics, like me, were wrong.

So, let’s clarify what I mean when I say Tesla is dying. I mean that its speculative value is dying.

As I have said before, if the market valued Tesla along standard norms, it would lose some 94% of its market cap. This insane speculative value is based entirely on Musk’s promises, not just for self-driving cars but also for technological dominance, colossal scale, market dominance, and massive profit margins. Moreover, Musk’s interest in the company seems to now solely be based on pushing this speculative valuation. In order to keep that speculative value, Tesla either needs to follow through and become the veritable monopoly it promised to become, or it needs to at least be perceived to be making progress in that direction.

The question is, is this sales growth enough to keep this speculation alive? Because if it isn’t, the value will drop, and Musk won’t be interested in sustaining Tesla anymore. He could let it run its course into obscurity or merge it with SpaceX to pump the market manipulation scheme he has going on over there. But either way, Tesla has to demonstrate enough progress to justify its speculation, or it’s curtains for the EV maker.

Sadly, I don’t think this sales increase will be enough.

This growth has far more to do with the market than Tesla.

In 2026 Q1, European BEV sales increased 26.2% year-over-year; in April alone, European BEV sales grew a gigantic 42% year-over-year, and while 2026 Q2 European BEV sales figures haven’t been released yet, they are likely to be far higher than the previous year. While China’s overall BEV market is currently shrinking due to its small, short-range BEV segment sharply contracting, its premium BEV segment (where Tesla operates) is growing rapidly. A variety of factors can cause this growth. Europe and China are already being hit hard by oil price increases from the Iran war, which are predicted to get worse, prompting many consumers to switch to electric vehicles to avoid rising bills. The cost-of-living crisis in Europe worsens this cost avoidance, causing even well-off buyers to behave cautiously and buy EVs.

This is a case of a rising tide raising all boats. But Tesla’s boat isn’t floating quite as well as it should. It appears Tesla’s sales growth might actually be behind the market growth. In other words, Tesla likely hasn’t made up ground in the market and is still trailing behind its competition. So these delivery figures have less to do with Tesla itself doing better and more to do with the fact that the number of people buying EVs has dramatically risen.

This is perfectly demonstrated by BYD, Tesla’s main global competitor. For years, Tesla was the world’s largest BEV maker, with BYD being a distant second. Over the past few quarters, BYD has caught up and been vying for Tesla’s №1 spot. But, in 2026 Q2, they delivered 557,090 BEVs globally. That is 16% or 77,000 more than Tesla delivered and is actually substantially more than Tesla has ever delivered in a quarter! BYD has now comfortably cemented its lead against Tesla to become the new largest electric vehicle maker on the planet. Bear in mind that the global BEV market is also becoming significantly more diverse as new players enter and succeed.

I don’t think you quite realise the monumental nature of this change. Back in Q1 of 2020, Tesla held a 29% share in the global BEV market. It has dropped consistently since then to just 13% by Q1 2026, and as BYD shows, it is likely to have fallen again in Q2 2026. Tesla is falling behind rapidly.

The narrative of Tesla’s speculative value over the past decade has been that it would keep ahead of the competition and retain its dominant market share as the market grew. The astronomical profits from that dominance would then fund its self-driving and Robotaxi rollout, enabling it to smother the competition until Tesla essentially dominates global personal transport and rakes in hundreds of billions of dollars in revenue each year.

If Tesla really was winning back its market share and becoming as dominant as it needed to be to justify its stock price, BYD simply wouldn’t be pulling ahead of it like this.

Because Tesla’s sales growth can’t really be attributed to Tesla, and the company is falling behind the wider market, I doubt these sales figures are enough to justify Tesla’s speculative value — at least for the vehicle sales side of the company.

I also think people don’t realise just how rapidly Tesla has to grow to even come close to the targets that created this speculation.

Take Tesla’s mythical $25,000 ‘Model 2’. This vehicle was meant to actually deliver Tesla’s sales growth. Musk said it would launch in 2025, with production rapidly scaling to well over a million deliveries a year, which would have boosted Tesla sales by over 60%. I cannot stress how important this vehicle was to Tesla’s future. Automotive analysts at Bloomberg NEF stated it was critical for Tesla to remain at the forefront of the market and fend off Chinese rivals. Yet this promised vehicle and its growth are nowhere to be seen. Against his executives’ advice, Musk scrapped the vehicle to focus development funds on the Robotaxi (read more here). These funds were supposed to have come from rising profits from sales growth that Model 2 was expected to deliver, so this decision made no sense at all. And now, rival BEVs with almost identical specs and price are selling like hotcakes (read more here).

Tesla has to do something drastic to make up for the lack of Model 2 and the sales and profit it would have garnered.

But, truth be told, the Model 2 wasn’t enough on its own to meet Musk’s targets. Musk originally set a target of selling at least 20 million vehicles annually by 2030. That is the same as Toyota and VW (including their subbrands) combined. To achieve this, Tesla would have had to launch multiple new models each year (including vans, economy cars, sports cars, large SUVs, different kinds of trucks, you name it) and have every single one be a market leader.

Musk has since quietly dropped this target, though speculation about future market dominance of this scale remains. Musk’s insane Tesla pay packet does have a very watered-down condition that Tesla’s total lifetime vehicle deliveries must reach 20 million by 2035 (read more here). By the end of 2025, Tesla had sold cumulatively 9.24 million vehicles. So, to meet this pathetic target, Tesla only has to sell 1.3 million vehicles a year, or roughly 20% less than it currently does. It’s obvious what Musk is doing: he is trying to quietly move the goalposts to make it look like he is delivering on the growth he once promised. But this is hollow. The speculative value isn’t based on his new, heavily lowered targets but on the lofty targets he once set and the feeling of limitless growth they inspired in investors.

Tesla was never going to reach 20 million sales a year; that was bombastic hyperbole. But to meet the speculative value this target gave Tesla and to generate the profits needed to fund its other speculative programs (i.e., the Robotaxi), it needed to at least deliver on what these targets signalled to investors: unprecedented growth.

A 25% year-over-year sales increase after multiple years of declining sales is not indicative of unprecedented growth, especially when the wider BEV market is growing even faster and your main competitor is substantially pulling ahead. So no, this growth isn’t egg on my face. It doesn’t prove the critics wrong, because the improvement still isn’t enough.

Tesla’s worsening profit problem only compounds this issue.

Tesla’s net profit margin peaked in 2023 at over 15%, buoyed by government grants and considerable demand. Tesla’s in-house 4680 battery was supposed to drastically cut production costs, enabling it to keep this sizeable margin even when these grants were eventually phased out or competition drove down prices. But again, thanks to Musk’s mismanagement, this project has gone nowhere, and the 4680 is well behind the market, leading Tesla to source better, cheaper batteries from the likes of its mortal enemy BYD (read more here). Then, Tesla’s global sales began to drop, so they had to dramatically reduce prices to compete, slashing their profitability. By the end of Q1 2026, Tesla’s net profit margin was just 3.94%. Moreover, the vast majority, if not all, of that profit does not come from vehicle sales but from Tesla selling carbon offset credits to other automakers, a scheme which Trump is ending in the US, and global automakers are buying less and less of these credits as they sell more of their own EVs (read more here). In other words, Tesla could very soon be unprofitable or, at the very least, have an unsustainably small profit.

For comparison, Toyota’s profit margin is currently 8.91%, which it almost entirely receives from vehicle sales, not government programs.

This profit problem is a deeply important piece of context for the recent increase in sales, as Tesla may have actively made it worse for themselves.

At the end of last year, Tesla cut Model 3 & Y prices by up to 50%, which have since dropped even further. In fact, you can still lease a Model Y for as little as £274 a month (roughly $365) in the UK, which is insanely cheap for a £40,000+ car that depreciates like the Hindenburg. Additionally, they have offered huge trade-in incentives, which is remarkable given Tesla’s depreciation, aggressive 0% finance options and so on.

My point is, Tesla’s profitability was already in a precarious position. If they have had to slash profits even further to generate these sales, which is how it looks, that destroys the speculative narrative. The entire point is that they would dominate the BEV market while also being incredibly profitable, enabling them to invest heavily in autonomy and win the autonomous race.

Tesla has created a cavernous gap between what it promised and what it is delivering, technologically, market-wise and financially. Yes, this 25% increase in deliveries is likely a positive sign for Tesla, particularly if it simultaneously pushes up overall profit. But it is not enough to prop up and justify Tesla’s speculative value, especially when its flagship Robotaxi service is laughably awful and miles behind the competition (read more here).

And guess what, it seems we are already witnessing this fallout. Despite this 25% increase in deliveries, Tesla’s stock has fallen by 8%. The speculative value is crumbling.

Sales decline is an obvious route to corporate death, but so is disappearing profit and a sharp loss in market cap (particularly when the only thing the CEO cares about is the latter). That is why Tesla is still headed for the grave. It has no real options to solve this problem and deliver anything that remotely resembles the promises Musk made to boost speculation. So, when there is eventually a proper market correction, this lack of evidence supporting Tesla’s speculative value will leave it wildly vulnerable to a crash in value the likes of which we have never seen.

That death scenario is still very much on the table, and Musk’s only real way of avoiding it is to merge Tesla and SpaceX (though that would also be a death knell for Tesla, but that is a conversation for another time). Without a crystal ball, I can’t predict what will happen to Tesla or when this downfall will occur. But I do know that the existential risks Tesla faces have not disappeared at all.

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Thanks for reading! Everything expressed in this article is my opinion, and should not be taken as financial advice or accusations. Don’t forget to check out my YouTube channel for more from me, or Subscribe. Oh, and don’t forget to hit the share button below to get the word out!