Tesla faces turbulent quarters as US cuts EV incentives; Musk bets big on autonomy
is bracing for a few "rough quarters" ahead as reduced government support for
electric vehicles
in the United States threatens to dampen sales, CEO
Elon Musk
said during the company's Q2 earnings call on Wednesday. Shares of the electric carmaker fell nearly 5 per cent following the remarks, which reflected concerns about slowing demand and delayed production timelines, as per Reuters.
The electric vehicle giant posted its worst quarterly sales drop in over a decade, with revenue falling 12 per cent year-on-year to $22.5 billion for the April–June period, below analyst expectations of $22.74 billion, according to LSEG. Adjusted earnings per share came in at 40 cents, missing the 43-cent consensus.
Sluggish sales and lower subsidies cloud outlook
Tesla's vehicle deliveries declined 13.5 per cent in Q2, despite the release of an updated Model Y, its best-selling SUV. Compounding the pressure, US tax credits of up to $7,500 for EV buyers are set to be scaled back later this year under President Donald Trump's administration.
The company's automotive regulatory credit revenue also dropped sharply—down 51 per cent —impacting both its top line and profit. These credits are sold to other automakers struggling to meet emissions targets.
Despite the earnings miss, Tesla's automotive gross margin (excluding regulatory credits) stood at 14.96 per cent , slightly above expectations, helped by cost reductions in manufacturing.
Affordable EV delayed, autonomy remains key bet
Musk acknowledged that Tesla's more affordable EV, initially planned for release by mid-2025, would see slower-than-expected production ramp-up. Chief Financial Officer Vaibhav Taneja said limited volumes had been produced by the end of June, but the company stopped short of offering a timeline for wider rollout or disclosing key specifications.
In a moment of levity during the call, Musk jokingly described the vehicle as 'just a Model Y,' hinting at a stripped-down version of the existing SUV.
The real focus, however, remains on Tesla's long-term push into autonomous mobility. The company is banking on revenue from its Full Self-Driving (FSD) software and a future robotaxi business, with volume production of its custom-built Cybercab expected in 2026.
A small trial of robotaxi services has already begun in Austin, Texas, and the company is seeking regulatory approval to expand autonomous ride-hailing in several US states, including Nevada, Arizona, and Florida.
'Autonomy is the story,' Musk told investors, projecting that the robotaxi business could start materially contributing to Tesla's financials by late 2026.
Political noise and leadership exits raise questions
Beyond operational challenges, investor concerns are mounting over Musk's ability to focus on Tesla amid his broader ambitions. The billionaire recently announced the formation of a new political party, locking horns with the Trump administration. Despite pledging to reduce political engagements, Musk's increasing public involvement continues to divide attention.
The recent departure of several top executives, including a trusted lieutenant overseeing sales and manufacturing in North America and Europe, has only added to the uncertainty.
While Tesla's near-term prospects appear challenged by policy changes, pricing pressure, and intensifying competition—particularly from low-cost Chinese EVs—the company is betting on innovation and future services to drive growth. Whether its autonomy-focused strategy and a new, lower-cost model can deliver remains to be seen.
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