The ordeal isn’t over yet for Tesla or its investors, according to CEO Elon Musk, as it misses heaps of Wall Street targets in its latest earnings report.
“We probably could have a few rough quarters,” Musk said in a conference call on Wednesday, as quoted by the Financial Times.
If past is prelude, he could be onto something. In the second quarter, between April and June of this year, Tesla raked in just $1.2 billion in net income, when during that same period last year it made $1.4 billion.
Worse still, its revenue shrank by 12 percent from $25.5 billion to $22.5 billion, making it Tesla’s worst quarterly drop in sales in more than a decade, according to Reuters. It’s also Tesla’s third quarterly decline in profit in a row.
The stock market responded in kind. Tesla shares fell by over nine percent on Thursday, seesawing back after it had slowly nudged upwards in the week leading up to the latest earnings report. The automaker’s stock has rallied by around 50 percent since hitting a year-low in April, but overall, it’s down by nearly 25 percent this year.
Tesla has been in turmoil since Musk became increasingly involved in far-right politics over the past year or so, most notably by working alongside president Donald Trump to gut the federal government after spending hundreds of millions of dollars to get him elected.
This has severely damaged Tesla’s brand, making it the target of protests and vandalism. All the while, it’s faced steeper competition from other automakers, especially Chinese titan BYD, which recently surpassed Tesla as the largest EV company in the world. To drive up sales, Tesla has offered massive discounts and desperate financing deals, including for its newly refreshed Model Y — its stab at reviving its aging vehicle lineup — but these efforts, evidently, ate into its margins.
Musk also made a failed gamble with the Cybertruck. Tesla sold just 4,306 of the controversial pickup trucks in the second quarter, marking an astonishing 50 percent drop from last year. Its poor reliability and its controversial styling have hurt the automaker’s brand further.
Moreover, whatever Musk hoped to gain with his alliance with Trump has gone up in smoke after the pair had a spectacular falling out in June, which is still dragging on. Trump’s recently passed “big, beautiful bill” will remove a substantial $7,500 tax credit for EVs by the end of September, threatening Tesla’s already-shrinking sales.
The bill will also upend a program that allowed Tesla to sell credits to rival automakers who needed to offset their emissions to comply with federal regulations, earning the company over $11 billion to date. With Trump ending penalties for car companies that don’t meet those emission standards, that easy money stands to dry up. This quarter, Tesla’s regulatory credit revenue has shrunk to $439 million, which is less than half of what it made last year.
“We are in the transition period where we will lose a lot of incentives in the US,” Musk acknowledged on the call.
Musk went on to assure investors that things would turn around once Tesla’s robotaxi service starts generating a profit. That’s a huge uncertainty, however, as the limited robotaxi operation in Austin, Texas, has raised significant questions about the program’s capabilities and whether it will be able to scale “rapidly” as Musk has promised.
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