Tesla is still dominating in the California electric vehicle (EV) market, but its grip on the lead is slipping. According to the latest Q2 2025 Auto Outlook from the California New Car Dealers Association (CNCDA), Tesla vehicle registrations in the state fell 21% to 41,138 units, down from 52,119 in the same quarter last year, marking the automaker’s seventh consecutive quarter of declining sales.
Looking at the year so far, Tesla registrations are down 18.3%, making Tesla one of only six automakers to see a decline during this period. Meanwhile competitors are gaining ground, as Honda registrations rose 9.9%, Toyota grew 8.5%, and Chevrolet saw a strong 21% increase.
The Tesla Model 3 remains a top-selling passenger car with a 12.6% market share, but the Toyota Camry (12.2%) and Honda Civic (11.5%) are closing the gap.
The CNCDA report highlights that Tesla’s declining performance is dragging down the state’s overall zero-emission vehicle (ZEV) market. California’s ZEV share fell to 18.2% this quarter, down from 22% a year ago.
Challenges for Tesla in California
Tesla’s downturn in California can likely be attributed to a combination of product, political, and policy challenges. The company’s vehicle lineup, once seen as cutting-edge, is starting to show its age, and delays in introducing new models have left consumers looking at alternatives.
Even Tesla’s best-seller, the Model Y, has not been immune to this trend, with registrations falling 37% in the first half of the year despite a recent refresh.
Politics have also complicated Tesla’s position. Elon Musk’s previous association with President Donald Trump and the Department of Government Efficiency (DOGE) has alienated some California buyers. Adding to the pressure, Trump’s “One Big Beautiful Bill” has eliminated federal tax credits for new and used zero-emission vehicles starting in September, removing a key incentive for EV buyers and potentially dampening future demand.
At the same time, Tesla is involved in a legal battle with California’s DMV over allegations of misleading advertising related to its Autopilot and Full Self-Driving systems, with the state even seeking to suspend the company’s dealer license.
These combined challenges have created an uphill battle for Tesla to maintain its market share in what was once its strongest U.S. market.
Despite Decline, Tesla Holds Top EV Spots
Even with declining registrations, the Model Y and Model 3 remain the state’s two best-selling EVs, with 44,112 and 31,394 registrations respectively in the second quarter. A total of 3,622 Cybertrucks have also been registered from January to June, though the electric pickup ranks just 25th among alternative powertrains.
