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Tesla has reported a further decline in quarterly profits, with CEO Elon Musk warning of potentially challenging months ahead as the company prepares for the removal of federal tax incentives for electric vehicles (EVs) in the United States.
During an earnings call on Wednesday, Musk admitted that Tesla may face “a few rough quarters” following the end of the $7,500 tax credit for EV buyers, which will be scrapped on 30 September as part of President Donald Trump’s newly passed fiscal reform package.
Musk, however, maintained confidence in Tesla’s long-term future, pointing to the company’s focus on artificial intelligence, robotics, and autonomous transport. He predicted that once Tesla achieves “autonomy at scale”, expected by mid-2026, its financial outlook would become far more attractive.
This cautious outlook follows Tesla’s third consecutive quarter of declining profitability. For the second quarter, the electric carmaker posted net earnings of $1.2 billion, a 16% drop compared to the same period last year. Revenue also fell 12% to $22.5 billion. The company cited falling vehicle delivery numbers, reduced average selling prices, and increased spending on research and AI development as key factors behind the slump.
Tesla offered no full-year forecast for vehicle production, pointing to global economic uncertainty, shifting trade and fiscal conditions, and the pace of development in its autonomy programme.
Despite the financial pressures, Musk highlighted the recent launch of Tesla’s first robotaxi service in Austin, Texas. He also reiterated plans to produce a more affordable EV model. Tesla began building the lower-cost vehicle in June, with volume production expected to pick up in the second half of 2025. Executives said they delayed the rollout in order to maximise sales of existing models before the tax credit is phased out.
While some analysts, like those at JPMorgan Chase, have criticised Tesla’s weakening fundamentals and called the stock overvalued, others remain optimistic. Morgan Stanley continues to list Tesla as a “top pick” due to its advances in AI and robotics, though it acknowledged that Musk’s political controversies may weigh on investor confidence in the short term.
Tesla’s declining earnings come amid political turbulence involving Musk. Once a close ally of Trump, Musk has since fallen out with the president, criticising his fiscal policies and warning they could bankrupt the nation. Musk briefly served in Trump’s administration before resigning in May, and earlier this month launched his own political movement—the “America Party.”
Trump, in turn, mocked the party and threatened to revoke Musk’s government contracts, as well as consider his deportation. The tech mogul’s deepening political involvement and polarising image have contributed to growing backlash and public protests against Tesla. Following the earnings release, Tesla shares dropped by over 4% in after-hours trading.
