Bloomberg/Getty Tesla has said it will build cheaper cars and win approval for its self-driving software in Europe this year after seeing sales fall at the sharpest rate in at least a decade. Elon Musk's electric car firm told investors it had started "first builds of a more affordable model in June" while posting a slump in car deliveries and shrinking profits. The firm is struggling as it faces cuts to US government support for electric cars, competition from Chinese carmakers and a dent to Tesla's brand from Musk's controversial political activities. Meanwhile, Tesla told investors that US tariff policy had cost the firm $300m (£221m) over the three months to June and warned of further pain ahead. Tesla's chief financial officer Vaibhav Taneja said the end of a tax credit for buyers of electric cars in the US was also likely to hurt. The carmaker did not provide an update on its outlook for the year, warning it was "difficult to measure the impacts of shifting global trade and fiscal policies". Sales fell by 12% to $22.4bn - the biggest drop in at least a decade - after deliveries plunged 14%. Profit shrank by 16% to $1.1bn. Musk told investors that he expected the company's sales in Europe to increase once customers there are allowed to use the firm's self-driving software. He said he expected the first approval to come in the Netherlands but that the firm also hoped to win sign-off from the European Union, despite it having a "kafkaesque" bureaucracy. "Autonomy is the story," Musk said. "Autonomy is what amplifies the value [of the company] to stratospheric levels." But the firm's once-fat margins have shrunk sharply, with profits down in five of the last six quarters. Tesla's share price has fallen roughly 30% from a peak last year, after Musk's support for Donald Trump helped him win the White House. Since then, relations have soured between the former so-called "first buddy" and the US president. Tesla shares tumble as Trump-Musk feud erupts