Tesla disclosed a significant drop in first-quarter earnings on Tuesday, falling short of Wall Street's expectations as the electric vehicle manufacturer faced challenges with decelerating demand, intensifying competition, and increasing brand difficulties linked to CEO Elon Musk's political engagements.
The company's net income plummeted by 71% year-over-year to $409 million (£307 million), while revenue decreased by 9% to $0.27 billion, not meeting the consensus forecasts of $0.43 billion, as reported by .
Operating income took a 66% hit, descending to $0.4 billion, and the firm's operating margin shrank to 2.1% from 11.4% the previous year.
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In terms of vehicle deliveries, Tesla managed 336,681 units during the quarter, a 13% decline, marking its most lacklustre delivery performance since 2022.
The EV leader attributed the disappointing results to factors such as lower average selling prices, a temporary slump in demand due to the transition to its latest Model Y vehicle, and increased operating costs, especially in AI and research domains.
Looking ahead, Tesla refrained from providing financial projections for the upcoming quarter, pointing to the "rapidly evolving" trade and political environment.
Despite the earnings shortfall, Tesla's stock price experienced an uptick in after-hours trading, as market expectations had already been adjusted downwards following the company's poor delivery figures released earlier in the month.
Elon Musk to scale back government role
Elon Musk, the world's wealthiest individual and formerly one of Trump's most prominent supporters, revealed on an investor call his intention to reduce his contentious role as head of government "efficiency".
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Once enjoying almost unrestricted access to the West Wing, Musk's step down is set to commence in May, dedicating just one or two days a week to advising the White House on efficiency initiatives.
His comments follow months of criticism aimed at the CEO, suggesting that his political alignment with the Trump administration has negatively impacted his EV brand and distanced its core customer base.
"The work necessary to get the government's financial house in order is mostly done", he stated. "My time allocation to DOGE will drop significantly".
The former favourite of Trump's role in Washington, which is officially limited to 130 days, has sparked backlash from both investors and consumers.
Industry experts have pointed to Elon Musk's political affiliations as a primary cause for the declining brand sentiment and waning global demand.
Brand fallout and consumer backlash
Tesla's reputation as an innovative clean-energy brand has been undermined by its CEO's prominent political involvement, unpredictable commentary, and unchecked policy outbursts on X.
In Europe, Tesla sales have plummeted nearly 45 per cent year over year, as per data from the European Automobile Manufacturers Association (ACEA).
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In North America, the company is facing increasing dissatisfaction from owners, with incidents of vandalism and cancelled deliveries on the rise.
"The brand has become inseparable from Musk's political persona" observed Gabor Schreier, Chief Creative Officer at Saffron. "For many early adopters, the Tesla badge now carries political weight – and not the kind that helps sell cars."
Tesla also had to recall nearly 46,000 cyber trucks in the last quarter, which accounted for virtually all units sold. This setback was compounded by the company's exclusion from the Vancouver International Auto Show's lineup amidst consumer protests.
Cheaper EVs and robotaxis ahead
Despite these challenges, Elon Musk maintained a positive outlook for the future, reiterating Tesla's commitment to launching a more affordable EV platform by the first half of 2025 and forecasting the introduction of fully autonomous vehicles by the end of the year.
"The future for Tesla is better than ever" Musk declared. "We expect millions of Teslas operating fully autonomously in the second half of the year".
Tesla also underscored the continued growth in its energy division, which saw an increase in energy storage deployment during the quarter.
The company concluded the first quarter with a robust $37bn in cash and investments.
However, analysts warn that a full recovery hinges on Musk's ability to refocus on core operations and restore Tesla's tarnished brand image.
"If Musk steps away from the White House, there may be lasting brand damage – but Tesla will at least have its most important strategic thinker back at the helm," Wedbush analysts noted.
Tesla shares have seen a 50 per cent drop since December 2024, yet some retail investors still view this downturn as an opportunity to buy. AJ Bell analysts report that over the past three months, thrice as many DIY investors have purchased Tesla shares compared to those who sold them.