By Akash Sriram and Hyunjoo Jin
(Reuters) -Registrations of Tesla (NASDAQ:TSLA) cars in California fell 24% in the April to June period, marking the third consecutive quarter that the company posted a sales drop in its key market, indicating mounting challenges for the EV maker, according to industry data on Thursday.
High interest rates and stiff competition have softened demand for electric vehicles as consumers opt for less-expensive hybrid cars.
Potential Tesla customers in the United States have been shying away from buying its electric cars, partly due to CEO Elon Musk's polarizing persona.
Musk's embrace of Republicans and outspoken comments have sparked concerns about Tesla's brand, especially in liberal states such as California, which accounts for 10% of the company's global deliveries.
The world's richest man publicly endorsed former President Donald Trump for the first time in the U.S. presidential race after the assassination attempt on the Republican candidate on Saturday.
Tesla's California registrations fell to 52,211 vehicles in the second quarter, according to a report by the California New Car Dealers Association.
The battery electric vehicle market slipped only 1.3% during the period. In contrast, sales of hybrid vehicles surged 22% in California.
"Tesla's allure seems to be wearing off, signaling potential trouble for the direct-to-consumer manufacturer," the report said.
From January to June, Tesla saw its registrations in California slump 17%, even as distant rivals such as Hyundai Motor, Kia Motors, BMW, Mercedes-Benz, Ford, and Rivian increased sales by double-digit percentage points.
The electric-vehicle maker's Model Y crossover continues to be the best-selling model in the state, but its market share in the first half of the year fell to 53.4%, from 64.6% in the year-ago period.
In 2021, Tesla moved its headquarters from California to Texas, and Musk said this week his other companies such as Space X and X will follow suit over his disagreement with Governor Gavin Newsom's approval of a bill on transgender kids.
Tesla, which is set to report quarterly results on Tuesday, handed over more vehicles to customers in the second quarter than analysts had expected, although deliveries were lower than a year ago.