Tesla reports a second-quarter 23% drop in profits due to falling vehicle sales and lower margins, the company says. CEO Elon Musk, however, pivots from the bad news on a call with analysts, emphasizing future growth from robotaxis, robotics and rising revenue from the automaker’s fast-charging network.
Tesla earnings of $0.40 per share (non-GAAP) were exactly in line with Wall Street’s expectations, and the company slightly exceeded revenue expectations with $22.5 billion, though that revenue is its steepest year-over-year decline in a decade. Operating income dropped 42% year-over-year to less than $1 billion, with about half of that coming from regulatory credits the battery-electric-vehicle maker has been selling to other OEMs to offset emissions from their fleets heavy with internal-combustion-engine vehicles. Tesla’s regulatory credit revenue of $439 million was about half what it was in the same period a year ago, as the U.S. federal government is set to eliminate the requirement
Second-quarter vehicle deliveries were down 13.5% from Q2 2024 and that follows a 13% decline in the first quarter vs. like-2024. Further, heavy discounting by the No.1 BEV maker by volume, to maintain its current sales level, has eroded profitability.
Tesla notes “a sustained uncertain macro-economic environment” stemming from “shifting tariffs, unclear impacts from changes to fiscal policy and political sentiment” in its earnings release.
In a call with analysts, Musk says Tesla is in a “weird transition period” as it navigates the expiration of federal incentives supporting BEVs and regulatory holdups in scaling autonomous driving. “We probably could have a few rough quarters,” Musk says of his outlook.
The company tells investors that forecasting future car deliveries and profits is too unpredictable to give future guidance to investors. “It is difficult to measure the impacts of shifting global trade and fiscal policies on the automotive and energy supply chains, our cost structure and demand for durable goods and related services,” Tesla says in a statement.
Sales of Tesla vehicles have been under pressure since February, as the brand and its stores have been the targets of boycotts and demonstrations after Musk aligned with U.S. President Donald Trump and joined the White House Department of Government Efficiency. He has since left that position and has been distancing himself from White House policy and is backing formation of a third major U.S. political party. But the boycotts persist at a time when other BEV makers and legacy car companies have been proliferating new models.
Adam Jonas, auto analyst at Morgan Stanley, says Musk’s deepening political engagement “may add further near-term pressure to Tesla shares.” But Jonas also says Tesla’s Optimus robots could not only deliver billions in cost savings to the automaker in the next few years, but he is also enthusiastic about sales of Optimus to other companies as a driver of revenue and profits.
Tesla shares were off more than 8% in midday trading the day after the earnings report. Cantor Fitzgerald and Piper Sandler, though, both issued “buy” ratings on the automaker shares, citing non-vehicle businesses, especially autonomous technology and robotics.
Robotaxis
Musk has been touting the company’s fledgling robotaxi business, but analysts following the company closely point out the unrealistic timeline of the CEO’s forecasts for near-term growth. “I believe half of the population of the U.S. will be covered by Tesla’s Robotaxi by the end of the year,” Musk says Wednesday.
That forecast is seen as impossible. “Uncertainties” around Musk’s timeline, including large-scale robotaxi deployment by late 2026, is “overly optimistic,” says Ben Kallo at Baird Securities.
Musk believes regulatory approval will be the biggest hurdle to scaling robotaxis. Tesla’s current offering, undergoing testing in Austin, TX, requires a Tesla employee in each car, a major hurdle to scaling and also not reflective of a true robotaxi service. Musk, joined by the company’s self-driving chief Ashok Elluswamy, says San Francisco will be the first market beyond the Austin testbed where Tesla plans to expand its Robotaxi service. That expansion, the company says, will also have a human in the driver’s seat.
Waymo has a significant lead with robotaxi operations in several cities without supervisors inside the vehicles. And as of July 10, as reported by Reuters, Tesla had not even applied for either driverless testing or deployment permits in San Francisco or California.
Affordable Tesla and Supercharging
Tesla says it has produced the “first builds” of a “more affordable” BEV, which are de-contented versions of the Model 3 and Model Y. Musk for a year has discussed launching “more affordable models” that are based on its existing Model 3/Y vehicle platform, having abandoned development of a unique platform for a sub-$30,000 BEV. The company says it expects to begin volume production in the second half of 2025.
Tesla reports a Q2 gain in “services and other,” a basket of profits that includes vehicle service and supercharging – increasing to $3 billion in revenue for the quarter, up from $2.6 billion in revenue year-over-year. Profits in the quarter from that business were $167 million.
Tesla has been cutting deals with rival automakers to access its charging network, which is a superior experience to rival networks, according to multiple third-party surveys of BEV owners. Tesla charges more to non-Tesla BEV owners, which is helping to drive both revenue and profits.
Tesla has proved to be an innovation machine in mobility over the past decade. But it is facing a future of great instability around BEV growth and autonomous mobility, as well as seemingly declining customer appeal of the Tesla brand.
