Revenue falls 9% as deliveries decline, AI investments rise, and Musk signals reduced role in Trump administration
Tesla (Nasdaq: TSLA) reported a sharp 71% drop in first-quarter profit, with earnings and revenue missing analyst forecasts as the company grappled with factory disruptions, falling electric vehicle prices, and growing political fallout from CEO Elon Musk’s role in the Trump administration.
Net income fell to US$409 million, or 12 cents per diluted share, down from US$1.39 billion and 41 cents a year earlier. Revenue declined 9% to US$19.34 billion, well below Wall Street estimates of US$21.1 billion. Automotive revenue—the company’s core business—fell 20% year-on-year to US$13.97 billion.
Shares rose 4.6% on the day to US$237.97 but remain 40% lower year-to-date.
Model Y changeover hits production and revenue
The company produced 362,615 vehicles and delivered 336,681, down 16% and 13% respectively from a year earlier. Tesla cited the planned changeover of production lines for the refreshed Model Y across all four factories, resulting in several weeks of lost output. While the ramp of the new Model Y is “outpacing all past ramps,” the disruption weighed heavily on the quarter.
Average selling prices also declined, exacerbated by sales incentives and a weaker product mix. Operating margin fell to 2.1%, down from 5.5% in Q1 2024. Without regulatory credits, which rose to US$595 million, Tesla would have posted an automotive operating loss.
Energy division grows, but faces tariff threats
Energy generation and storage revenue rose 67% to US$2.73 billion, aided by strong demand for Powerwall and Megapack systems. Tesla crossed the 1 GWh deployment milestone for Powerwall and opened a new Megapack factory in Shanghai, which produced over 100 units in the quarter.
However, the company warned that rising tariffs could disproportionately impact its energy segment, which relies more heavily on international supply chains. Tesla said it is taking “actions to stabilize the business in the medium to long-term.”
AI, autonomy and new models still central to growth
Tesla reaffirmed that its robotaxi platform—dubbed Cybercab—remains on track for a pilot launch in Austin, Texas, by June. Vehicles at Tesla’s US factories now drive autonomously from the production line to outbound logistics lots, and the company began supervised FSD (Full Self Driving) operations in China, marking the first launch outside North America.
The firm also reiterated plans to introduce more affordable models in the first half of 2025. These will use a hybrid of current and next-gen platforms and share manufacturing lines with existing vehicles to avoid new factory investments. While this will yield fewer cost savings than a fully unboxed next-gen platform, Tesla believes it enables 60% production growth over 2024 volumes without capex expansion.
Musk to scale back time at DOGE
During the earnings call, Musk said his involvement in President Trump’s Department of Government Efficiency (DOGE) will drop “significantly” beginning in May. While he plans to continue advising the administration a day or two a week, he said his primary focus will shift back to Tesla.
Musk’s political role has triggered backlash, including protests in the US and Europe, Cybertruck vandalism, and Tesla’s removal from the Vancouver auto show. Analysts have warned of deepening brand damage, with Wedbush calling the situation a “fork in the road.” Tesla has also recalled nearly all 46,000 Cybertrucks sold to date.
Financial resilience and cautious outlook
Despite the weaker quarter, Tesla generated US$2.2 billion in operating cash flow and ended March with US$37 billion in cash and investments. Capital expenditure fell 46% year-on-year to US$1.5 billion, helping deliver US$664 million in free cash flow.
Still, the company withheld guidance for 2025, citing uncertainty from “shifting global trade policy” and “changing political sentiment” that could impact demand and supply chain costs. Tesla said it would revisit full-year guidance in its Q2 update.
Analyst views divided
While some analysts viewed the results as less bad than feared, others flagged growing structural concerns. Tesla’s revenue decline was its steepest since Q2 2022, and the company remains under pressure from more affordable EV competitors in China, particularly BYD.
Tesla’s gross margin held steady at 16.3% but remains well below levels seen in 2022. AI and R&D spending contributed to higher operating expenses, which rose 9% year-on-year to US$2.75 billion.
Despite the challenges, Musk struck an optimistic tone. “The future is incredibly bright and exciting,” he said on the call. “We’re going to do things that no one has even dreamed of.”
