Tesla reported a 16% year-on-year drop in second-quarter profits to $1.2 billion, as lower vehicle sales, reduced average selling prices, and growing operating costs combined to weigh on performance. Revenue also fell by 12% to $22.5 billion, reflecting a broader slowdown in the electric vehicle (EV) market.
The company had previously signaled weaker results after announcing a dip in vehicle deliveries earlier this month. While it continues to invest heavily in its artificial intelligence and robotics divisions, near-term profitability has taken a hit, and Tesla offered no full-year guidance on vehicle production.
“We are making prudent investments that will set up both our vehicle and energy businesses for growth,” the company said, pointing to unpredictable global trade and fiscal policy shifts as complicating factors.
Robotaxis, AI, and a New Affordable Model
Despite financial pressures, Tesla is doubling down on future-facing technologies. The company recently launched a robotaxi service in Austin, Texas, marking CEO Elon Musk’s first commercial rollout of a fully autonomous offering—albeit years behind schedule.
Tesla also highlighted its long-promised affordable EV, noting that the first builds began in June. Volume production of the model, targeted at a lower price point, is expected in the second half of 2025. This is seen as critical to competing with Chinese EV makers and expanding Tesla’s global footprint.
In parallel, Tesla has updated its Model Y, though pricing remains volatile. While the vehicle starts at $37,490, costs could rise once the $7,500 federal EV tax credit is phased out following President Donald Trump’s sweeping new tax legislation.
AI Bets Continue, but Investors Voice Concern
Tesla’s R&D spending remains elevated, particularly in artificial intelligence and robotics. The company continues to develop its Optimus humanoid robot and autonomous driving features—areas that bulls see as Tesla’s long-term value proposition.
Analysts remain divided. JPMorgan Chase has warned that Tesla’s share price is “completely divorced from increasingly deteriorating fundamentals,” citing disappointing vehicle rollout timelines and declining margins.
By contrast, Morgan Stanley maintains Tesla as a “top pick,” citing its AI leadership, though it acknowledged the risk that Musk’s political activities may continue to place downward pressure on the stock.
Musk’s Political Role Clouds Tesla’s Image
Beyond financials, Tesla continues to navigate reputational turbulence stemming from Musk’s deepening involvement in U.S. politics. His support for Trump’s 2024 presidential run, followed by his appointment to head the newly created Department of Government Efficiency, triggered public backlash, brand boycotts, and even incidents of vandalism at Tesla locations.
Tensions between Musk and Trump have since escalated, with Musk sharply criticizing Trump’s fiscal package and warning it could “bankrupt the country.” Earlier this month, Musk launched his own political party—the “America Party”—prompting Trump to mock the move and threaten to revoke Musk’s government contracts.
These developments have raised new concerns among investors and consumers about the future of Tesla’s leadership and market positioning.
Stock Reaction
Tesla shares dipped 0.4% in after-hours trading following the earnings release. With mounting pressure from both the competitive EV landscape and Musk’s high-profile political clashes, Tesla’s path forward may depend as much on managing public perception as on technical innovation.