Tesla’s Nightmare Continues As Musk Warns of “Tough Quarters”Forward

Tesla’s second-quarter earnings paint a grim image: falling income, slumping gross sales, and a popularity hit that retains on hurting.

The all-electric carmaker reported web earnings of $1.17 billion, down 16.3% from the identical interval in 2024. Income fell 12% to $22.5 billion from $25.5 billion a 12 months earlier, marking Tesla’s second consecutive quarter of declining income and income this 12 months.

The trigger is evident: Tesla is promoting fewer automobiles and chopping costs to chase demand. Deliveries fell 13.5% within the second quarter, displaying how steep the drop has been.

Tesla’s troubles are about greater than economics. CEO Elon Musk has turn into one of the vital polarizing figures within the company world. His political pivot—spending almost $290 million to assist Donald Trump return to the White Home in 2024 and later becoming a member of Trump’s administration as head of the Division of Authorities Effectivity (DOGE)—sparked international backlash. The notorious DOGE started aggressively chopping federal company budgets, sparking protests outdoors Tesla showrooms worldwide and, extra importantly, alienating the corporate’s core buyer base. By changing into a distinguished face of the administration and championing right-wing causes, Musk has pushed away the liberal consumers within the U.S. and Europe who as soon as shaped the bedrock of Tesla’s assist. Gross sales took successful.

Musk resigned from DOGE in Might to refocus on Tesla, however the injury lingers. Including to the drama, he lately launched a brand new political social gathering, the American Occasion, vowing to area candidates within the 2026 midterm elections after falling out with Trump.

“We in all probability may have a couple of tough quarters. I’m not saying that we are going to, however we may,” Musk admitted on the earnings call with analysts.

The street forward seems brutal. President Trump’s “One Huge Stunning Invoice,” signed on July 4, kills the $7,500 federal EV tax credit score as of September 30. Meaning Teslas are about to get pricier. The identical legislation scraps clean-air penalties for automakers who fail emissions requirements, ending a key Tesla income stream from promoting regulatory credit to opponents. In Q2, these credit score gross sales had been slashed almost in half, falling to $439 million from $890 million a 12 months earlier.

“The One Huge Stunning Invoice has a number of modifications that will have an effect on our enterprise within the close to time period,” CFO Vaibhav Taneja instructed analysts. Tesla, which manufactures most of its U.S. automobiles in Fremont, California, and Austin, Texas, nonetheless depends closely on imported uncooked supplies and elements, leaving it weak to tariffs.

“We began seeing the affect of tariffs,” Taneja mentioned. “Sequentially, the price of tariffs elevated round $300 million with roughly two-thirds of that affect in automotive and the remaining in vitality. Nevertheless, given the latency in manufacturing and gross sales, the complete affect will come via within the following quarters.”

He warned: “Prices will improve within the close to time period. Whereas we’re doing our greatest to handle these impacts, we’re in an unpredictable surroundings on the tariff entrance.”

The mixture of slowing demand, value cuts, disappearing EV incentives, and rising tariffs suggests Tesla’s earnings ache isn’t going away quickly. However on Wednesday’s earnings name, Musk as soon as once more pitched his imaginative and prescient of Tesla’s future, not as a automobile firm, however as a robotics and AI powerhouse constructed on humanoid robots, automation, and self-driving tech.

The issue? Tesla’s late-June robotaxi launch in Austin confirmed how far behind it’s. Waymo, Google’s self-driving subsidiary, already operates absolutely autonomous robotaxis throughout a number of U.S. cities and covers greater than twice Tesla’s Austin service space. Tesla’s small fleet, in the meantime, is invite-only and nonetheless requires a human supervisor within the passenger seat.