Get ready for more bad news from Tesla
Investors already know that second-quarter sales fell a record 13.5% compared to a year earlier, the second straight quarter in which its sales were off at least 13%.
But a second-quarter earnings report, due after the market closes at 4pm ET, could shed light on other, potentially bigger problems as well, as the company faces losing its title as the world's biggest EV maker to China's BYD.
The first-quarter sales drop sparked an even larger 71% drop in net income in that period. Tesla is expected to post another decline in the second quarter, albeit not as large. Analysts estimate net income dropped about $350 million, or nearly 24%, in the March through June period.
Looking ahead, though, a $7,500 tax credit for US EV buyers will go away in October, which could force the company to further cut prices, and thereby profit margins, to support sales. US buyers account for nearly half of Tesla's sales.
Tariffs could bite, as well. Unlike all other major automakers, Tesla (TSLA) builds every car it sells in the US at its two American plants, helping it avoid 25% import car tariffs. But Tesla does depend on imported parts and raw materials, which are still tariffed. Last week, the Chinese graphite used in its batteries became subject to another tariff that raised the costs 160% from last year.
Perhaps the most serious financial problem facing Tesla is the elimination of the market for regulatory credit sales, which has fed $10.6 billion to the company's bottom line since 2019. Gas-powered carmakers in the past bought emissions credits from Tesla, since its EVs came in below emissions limits. But the Republican tax and spending bill passed earlier this month removed financial penalties for automakers violating emissions rules.
Tesla would have lost money in the first three months of the year without its revenue from selling those credits.
Tesla CEO Elon Musk will undoubtedly try to focus investor attention on the company's plans for robotaxis and humanoid robots to offset those concerns. It started a long-promised robotaxi service in June – but just a portion of its hometown of Austin, Texas, to friends and fans of the company, and with an employee sitting beside the empty driver's seat. It could be years before a robotaxi service actually makes money for the company.
And there's a wildcard: Three months ago, Tesla's quarterly earnings were dominated by the news that Musk was leaving the Trump administration and would be spending most of his time once again running Tesla. But while he stepped away from an official role, he hasn't been able to quit politics entirely, having since had a falling out with President Donald Trump. Now he's announced plans to start a third political party. What that could mean for Tesla's own future is murky at best.
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