Tesla reports sharp decline in Q2 earnings: Revenue drops 12% as Elon Musk-led EV giant faces 'rough quarters'; Here's all you need to know
The Elon Musk-led electric vehicle (EV) giant is facing headwinds from reduced government support and softening demand, even as it pushes ahead with ambitious plans for autonomous driving and new vehicle models.
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For the second quarter, Tesla's total revenue fell 12% to $22.5 billion, down from $25.5 billion in the same period last year, missing analyst expectations compiled by LSEG.
Automotive revenue, which makes up the bulk of Tesla's business, declined by 16% year-on-year to $16.7 billion.
Adjusted net income also dropped 23% to $1.4 billion, or 40 cents per share, falling short of Wall Street forecasts.
Tesla's second consecutive decline
This marks Tesla's second consecutive quarter of declining revenue, Reuters reported.
The results come despite the launch of a refreshed version of its popular Model Y SUV, which had been expected to boost sales.
In fact, global deliveries for the quarter dropped 13.5%.
A major blow came from a sharp 51% drop in revenue from automotive regulatory credits. These credits, which other automakers buy from Tesla to meet emissions rules, have historically supported Tesla's profitability.
The fall in credit sales further dented both revenue and earnings this quarter.
Tesla shares fell nearly 5%
Shares of Tesla fell nearly 5% after the earnings announcement, as CEO Musk acknowledged that the company might face "a few rough quarters" ahead.
"We probably could have a few rough quarters," Musk said, when questioned on the credits.
"I'm not saying we will, but we could - you know, Q4, Q1, maybe Q2, but once you get to autonomy at scale in the second half of next year, certainly by the end of next year, I think I'd be surprised if Tesla's economics are not very compelling," he added.
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He attributed the short-term challenges to the reduction of EV tax credits in the US, a key incentive that is set to shrink by $7,500 later this year.
Elon Musk
struck an optimistic tone
Despite the tough quarter, Musk struck an optimistic tone about Tesla's future. Musk pointed to the company's autonomous driving technology as a key growth driver, predicting that revenue from self-driving software and services could start ramping up in the second half of 2025.
Tesla is investing heavily in developing a robotaxi fleet, including a custom-built autonomous vehicle known as the "Cybercab," which is expected to go into volume production in 2026.
A small trial of robotaxis using Model Y SUVs has already begun in Austin, Texas.
Musk said Tesla is seeking regulatory approval for its Full Self-Driving (FSD) software in several US states, as well as in the Netherlands, and aims to launch autonomous ride-hailing services across half the US by year-end.
'It's just a Model Y': Elon Musk
The company is also working on a new, more affordable model — a stripped-down version of the Model Y, to target a wider customer base.
However, Chief Financial Officer Vaibhav Taneja told Reuters that the production of the lower-cost model would ramp up more slowly than originally planned, starting next quarter.
Musk, when asked about the vehicle's design, jokingly said, "It's just a Model Y," adding to "let the cat out of the bag there."
Analysts say Tesla's focus on a cheaper EV could be key to regaining sales momentum, especially as the company faces increasing competition from lower-priced Chinese EV makers and consumer backlash against Musk's controversial political stances.
Tesla's lineup is also beginning to show its age, despite the recent refresh of the Model Y.
The company reiterated its production plans for the Cyber cab and its long-delayed Semi truck, both scheduled for volume output in 2026.
While Tesla's near-term financials appear shaky, much of its trillion-dollar valuation still hinges on its autonomous vehicle and robotics ambitions.
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