Elon Musk’s Tesla faces a stubborn European headwind that shows no sign of easing. In January, new car registrations for the brand slipped to 8,074, a 17% year‑over‑year drop, according to data from the European Automobile Manufacturers Association (ACEA). This marks the 13th straight month of shrinking sales for Tesla, and its share across the EU, UK, Switzerland, Norway, and Iceland slipped to 0.8% from 1% a year earlier. CNBC quoted ING senior sector economist Rico Liman, who described early 2026 as a “very weak” start for Tesla. He attributed part of the decline to a damaged European image last year and to a growing array of more affordable electric-vehicle options from rivals such as BYD, MG, and ZEEKR.
Analysts also point to Tesla’s strategic focus on autonomous features over expanding its mass‑market lineup as a vulnerability. Compounding pressure is a surplus of used Teslas from earlier lease cycles, which has driven down second‑hand prices and dampened new‑car demand.
Tesla has also grappled with reputational and political headwinds in Europe tied to Elon Musk’s U.S. political involvement. Musk’s financial support for former President Donald Trump’s re‑election campaign and subsequent clashes with federal agencies sparked protests at Tesla dealerships across some European markets. Although Musk later publicly contested Trump, many observers believe the reputational impact persists.
Meanwhile, BYD, the Chinese EV giant, continues to ramp up quickly. January registrations for BYD jumped 165% year over year to 18,242 units, lifting its European market share to 1.9% from 0.7% previously. While Tariffs have shielded BYD from U.S. exposure, its cost advantage remains a major competitive edge in Europe. Morningstar strategist Michael Field notes that Chinese automakers benefit from structurally lower labor costs, a gap unlikely to close over the next five years.
Across the broader market, car sales in the EU, UK, and EFTA fell 3.5% in January to 961,382 units. Petrol car registrations dropped by 26%, while battery-electric, plug-in hybrid, and hybrid-electric vehicles rose by 14%, 32%, and 6%, respectively, signaling a continuing shift toward electrification even as overall demand softens.
