Get ready for more bad news from Tesla
Chris Isidore
, CNN
Auto revenue fell 16 percent, while overall revenue fell 12 percent, a bigger drop than forecast by Wall Street.
Photo:
AFP / JULIEN DE ROSA
Tesla's troubles continued Wednesday (US time) as the company reported a 23 percent drop in adjusted earnings for the second quarter, a fall that followed a record drop in sales in the same period.
The company's adjusted net income, the measure most closely followed on Wall Street, fell $419 million (NZ$695.54m) from one year ago to $1.4 billion (NZ$2.32b). That 23 percent drop is a bigger percentage decline than the 13.5 percent fall in vehicle sales during the quarter, which was the largest in the company's history.
The stricter reading for net income fell 16 percent to $1.2b (NZ$1.99b).
Auto revenue fell 16 percent, while overall revenue fell 12 percent, a bigger drop than forecast by Wall Street, suggesting there was weakness in auto prices it could charge since revenue was off more than the number of vehicles sold.
Tesla's sales plunge over the last 18 months has been a stunning turn for a company that recorded only one quarterly year-over-year sales drop before 2024. And the company faces significant trouble ahead.
Investors already know that second-quarter sales fell a
record 13.5 percent
compared to a year earlier, the second straight quarter in which its sales were off at least 13 percent.
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 percent 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 $350m (NZ$581m,), or nearly 24 percent, in the March through June period.
Looking ahead, though, a $7500 (NZ$12,450) 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, Teslabuilds every car it sells in the US at its two American plants, helping it avoid 25 percent 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 percent
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 (NZ$17.6b) 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.
Elon Musk has not stayed out of politics since leaving the Trump administration.
Photo:
AFP / Angela Weiss
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 [https://edition.cnn.com/2025/07/05/politics/elon-musk-political-party third political party. What that could mean for Tesla's own future is murky at best.
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