Tesla suffers yet another blow as Turkey hikes EV tax just after disappointing earnings

Tesla is facing new problems in Turkey just as the company is already struggling to recover from weak quarterly results. On Monday, Turkish authorities raised the lowest bracket of the special consumption tax on electric vehicles from 10% to 25%, directly affecting the EV maker’s top-selling Model Y.

The hike was made official through a presidential decree published in the Official Gazette, as reported by Bloomberg. This tax category was one of the few tools Tesla had been using to grow its business in the country.

By offering a specific version of the Model Y tailored for Turkey’s earlier 10% EV tax rate, the company was able to offer the vehicle at a competitive price of 1.87 million liras, or about $46,100.

But with the new rate in effect, buyers can expect that price to go up by roughly $6,000, creating a major barrier for new demand. The move impacts all vehicles in that tax bracket, but combustion engine rivals are still being taxed under the old system.

Turkey now adds to Tesla’s growing list of problems

Elon Musk had been counting on Turkey to help balance the sharp decline in demand across Europe. And for a while, it worked. In June 2025, Tesla’s sales in Turkey jumped 171% year-over-year to 7,235 units, with the Model Y leading EV sales. Meanwhile, registrations across Europe fell 23% compared to the same month in 2024, falling to 34,781 vehicles.

This made Turkey one of Tesla’s best-performing markets globally, and the Model Y’s tax advantage played a major role in that growth. The new tax changes, however, put all of that at risk. Musk warned recently that 2025 would be a difficult year, blaming the loss of U.S. EV subsidies and Tesla’s slow progress in self-driving technology.

The tax increase in Turkey doesn’t just hit Tesla. It also puts pressure on competitors like BYD, the Chinese automaker that’s been trying to gain traction in Turkey by offering the Dolphin, Atto 3, and Seal under the same previous tax scheme. BYD has also announced plans to begin local production.

Companies such as Volkswagen, Hyundai, and Stellantis that sell lower-cost electric vehicles in the country could see their business models upended as well.

Musk said during Tesla’s earnings call that, “We are in the transition period where we will lose a lot of incentives in the US,” adding, “We probably could have a few rough quarters.”

His comments came as the company reported a 23% decline in second-quarter profits, further highlighting the company’s shaky position. The stock dropped over 4% in after-hours trading, and is now down 30% from its mid-December high.

Politics and public image continue to weigh on Tesla

Back in the U.S., Musk’s political involvement hasn’t helped. After openly backing Donald Trump’s re-election, he took a post in Trump’s new administration as head of the Department of Government Efficiency, before later leaving the administration in May after public breakup with Trump. Since then, he’s become an outspoken critic of the administration’s economic strategy and has pledged to launch his own political party.

But that political U-turn came with consequences. Many Tesla customers were turned off by Musk’s support of federal workforce layoffs, and his image as a public figure has taken a hit. That backlash is now starting to reflect in sales numbers, with Tesla struggling to maintain momentum against growing competition from both Chinese and Western automakers.

At the same time, Tesla is dealing with an aging model lineup, while rivals continue to release fresher, cheaper EVs. With tax changes in one of its few bright spots, a shrinking lead in innovation, and political distractions piling up, Tesla’s problems are stacking fast.