Although Musk had anticipated that Tesla's performance in the European market in the second quarter would be better than in the first quarter, the latest data shows that Tesla Europe is still struggling.

According to data released by the European Automobile Manufacturers Association (ACEA) on Wednesday, Tesla registered only 13,951 new cars in Europe in April, down 2.3% from the same period last year, the lowest level since January 2023.

In stark contrast to this, overall, the European electric vehicle market achieved 14% year-on-year growth in April. Tesla's Shanghai factory also saw a decline in shipments.

At the April earnings conference call, Tesla announced that net profit for the first quarter fell 55% year on year to 1.13 billion US dollars, and the operating profit margin fell further to 5.5% from 8.2% in the fourth quarter of last year.

Musk has said that in the second quarter, Tesla will escape the impact of multiple negative factors in the first quarter, such as the interruption of Red Sea shipping and suspected arson incidents near the German factory. But Tesla's situation didn't improve as he had anticipated.

Some countries, including Germany and Sweden, have stopped or cut subsidies for electric vehicles in recent months, casting a shadow over the growth of electric vehicle sales in Europe.

In Germany, Europe's largest car market, most brands were impacted by declining subsidy policies, but Tesla's performance last month was particularly weak. In April, the number of electric vehicle registrations in Germany remained almost flat, while Tesla's sales fell 32%.

In the UK market, Tesla's new car registrations fell 25% in April, while the cumulative decline in the first four months of this year was as high as 14%.

In addition to the challenge of declining sales across the European market, Tesla is also facing anger from key customers — leasing companies. If not handled well, its situation in the European market will deteriorate further.

Wall Street News previously mentioned that leasing companies account for nearly half of Tesla's sales in Europe. However, although Tesla's frequent price reduction strategy has stimulated sales, it has also led to a sharp drop in the value of its vehicles, causing damage to European rental profits.

The business model of a leasing company is to buy a new car and then lease it to the consumer. In determining the rental price, the leasing company takes into account the expected residual value of the vehicle, that is, the estimated resale value of the vehicle at the end of the lease period. The profitability of leasing companies is largely dependent on the realization of these residual values.

However, if the price of new cars on the market suddenly falls sharply, it will have a negative impact on the residual value of vehicles already rented out. At the end of the rental period, the actual resale price of these vehicles may be far lower than initially estimated. This reduction in residual value will directly lead to financial losses for leasing companies.

According to reports, Tesla may offer exclusive discounts to rental companies, but the discount could further hurt its profit levels.