Tesla is going through a tough time as it just reported a 71% drop in profit compared to the same time last year. In the first quarter of the year, Tesla earned $409 million in net income from $19.3 billion in revenue, after delivering around 337,000 electric vehicles. This marks its weakest sales quarter in more than two years and follows its first year-to-year drop in sales.
The numbers would have looked even worse if not for $595 million earned from selling zero-emission tax credits. Without those credits, Tesla would have recorded a loss. The company is now facing serious financial pressure, putting one of its main advantages in the EV industry at risk.
Still, Testa’s stock went up in after-hours trading. Investors responded positively to CEO Elon Musk’s comments about focusing more on Tesla. He mentioned he would reduce his role in the Department of Government Efficiency to dedicate more time to the company. Musk also announced plans to start production of a lower-cost electric vehicle this June, keeping investors interested despite the struggles.
Tesla is also facing risks from global politics. The company warned that new trade tariffs and changing political views could affect demand, especially with tariffs targeting China. Tesla said these changes could hurt its Energy business more than its car division.
While the company is sticking with its goal of making cheaper electric cars, some reports suggest delays. Tesla says these models will use a mix of new and existing technology and be built on the same production lines as current models like the Model Y and Model 3.
At the same time, Tesla’s newer products like the Cybertruck are not performing as expected. Elon Musk’s political views and ties to former President Donald Trump have also caused some people to turn away from the Tesla brand.
Musk is putting a lot of focus on future projects like the Robotaxi and Optimus robot. He plans to launch the first Robotaxi service in Austin this June, with more cities probably coming later this year. However, there is little information about how the service will actually work, and so far, Tesla hasn’t proven its cars can drive themselves without human help. An internal report also shows that the Robotaxi could lose money even if it becomes operational.
Tesla has been dealing with falling profits for over a year now. In the first quarter of 2024, profits dropped 55% compared to the previous year. The second quarter brought more losses, with profits falling 45% due to a $622 million restructuring cost. Tesla’s earnings were only lifted by a record $890 million from selling regulatory credits.
As Tesla pushes forward with its big plans, it will need to manage its finances, brand reputation, and market position carefully to stay ahead in the EV race.
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