Tesla announced a net profit of $409 million USD for the first quarter of 2025, a 71-percent decrease compared to the same period last year. Many analysts are attributing that to a toxic combination of factors: A decline in global sales, a lack of new products and Elon Musk's political activism.
Total revenue for the quarter fell by 9.2 percent to $19.3 billion. Automotive revenue, more specifically, plummeted by 20 percent to $12.9 billion.
Saved by carbon credits
Tesla generated $595 million by selling emission credits to other automakers — an increase from the $442 million the previous year. Without these credits, Tesla would have recorded a net loss for the January to March period.
Musk pulling back from government involvement
Elon Musk said during the investment call announcing results that he will spend less time as an advisor to Donald Trump and head of the Department of Governmental Efficiency (DOGE). He will continue to dedicate "one or two days a week" to it, but "starting in May, this involvement will decrease significantly."
Musk claimed he advocates for free trade in his discussions with Trump, despite the heavy taxes imposed on cars and parts imported from Mexico and Canada. However, he acknowledged that his political engagement has provoked a negative reaction.
Lower pricing, declining sales
Tesla attributes the drop in profits to vehicle price reductions, a decrease in deliveries (-13 percent, or 336,681 units) and an increase in operating expenses. Model Y deliveries, in particular, suffered from the transition to an updated version of the model, currently in production at factories in California, Texas, Germany and China.
Upcoming projects: Robotaxi and affordable models
Tesla is maintaining its timelines for key projects: a new range of more affordable vehicles planned for early 2025, and the Cybercab, an autonomous robotaxi using a revolutionary "unboxed" production method, with large-scale production starting in 2026.
The pilot launch of a robotaxi service in Austin, Texas, is still scheduled for June. Musk hopes for a national rollout if that proves successful. He also claims that current Tesla vehicles could become fully autonomous via a software update before the end of the year in certain American cities.
Wall Street relieved, despite everything
While analysts had expected disastrous Q1 results for Tesla, a 67-percent increase in energy-related revenue cushioned the fall. Gross profit stood at 16.3 percent, above the forecasted 15.8 percent but still down from last year's 17.4 percent.
On news of the “less bad than expected” results, Tesla's stock rose 5 percent after market close.
Musk's reputation taking hit
Some analysts, including Dan Ives, are urging Musk to step down from his government roles to refocus on Tesla. According to Ives, the brand's image has suffered from his political stances on X and his presence in the Trump administration.