Updated July 24, 2025 at 1:12 PM CDT
Tesla on Wednesday reported a drop in its profit during the second quarter, as the electric vehicle maker's woes continue despite CEO Elon Musk's pivot back to focusing on his companies after his controversial role leading the Trump administration's government cost cutting efforts.
The company's electric vehicle sales have been flagging, and earlier this month it reported a drop of 13.5% in the quarter, compared with the same period a year ago. On Wednesday, Tesla said its net income also suffered, slumping 16% year-on-year.
That paled in comparison to the 71% drop in year-on-year profits the company reported during the first quarter, when sales were down 13%.
But on a call Wednesday evening with analysts, the company flagged a rocky outlook for EV income. Tesla's Chief Financial Officer Vaibhav Taneja forecast lower revenue due to changes in vehicle regulations that were part of the tax and spending bill that President Trump signed into law this month. Those regulations provided a revenue source for Tesla because competitors who couldn't meet fuel economy targets could pay Tesla for "regulatory credits" instead of paying fines; the new law eliminates the fines.
In addition, new and used EV tax credits will end on September 30.
"The One Big Bill has a lot of changes that would affect our business in the near term," he said on the earnings call.
"If you are in the U.S. and looking to buy a car, place your order now as we may not be able to guarantee delivery of orders placed in the later part of August and beyond," he said.
Taneja said plans to ramp up production of a lower-cost vehicle were slowed as the company rushed to meet an expected bump in demand ahead of the end of subsidies.
Musk said the company was in "a weird transition period where we'll lose a lot of incentives in the U.S." and predicted "we probably could have a few rough quarters. I'm not saying we will, but we could."
In a bid to cast a spotlight beyond car sales, in its earnings report, the company called the second quarter "a seminal point in Tesla's history: the beginning of our transition from leading the electric vehicle and renewable energy industries to also becoming a leader in AI, robotics and related services."
The company rolled out the first iteration of its robotaxi service in Austin in June, and the earnings report said the company's approach to the service would allow for rapid scaling and improved profitability. The company is also developing a humanoid robot called Optimus.
On the call, Musk said Tesla was getting regulatory permission to expand autonomous ride hailing into Arizona, Florida, Nevada and the San Francisco Bay Area, and he made a bold prediction about future expansion.
"I think we'll probably have autonomous ride hailing in probably half the population of the U.S. by the end of the year. That's at least our goal subject to regulatory approvals," he said.
Musk did not explain how the company planned to ramp up so quickly from a limited test zone in a city of about 1 million people to half the U.S. population.
During the second quarter, Tesla's total automotive revenue slipped 16% while energy generation and storage revenue was off 7%. Services and other revenue grew by 17%.
Onlookers have blamed Tesla's flagging car sales on Musk's political activity, although during the previous quarter's call he said he didn't see "any reduction in demand" and, without evidence, dismissed protests against his company as "paid for."
Surveys have found that the company's brand reputation has taken a serious hit, particularly among liberal or Democratic car shoppers — who tend to be more likely, at least right now, to shop for an electric vehicle. Musk has stepped away from his leadership of DOGE and had a very public split with Donald Trump, but he remains interested in politics, recently floating the idea of launching a third party.
Another likely factor is increased competition among EV makers. In the U.S., the traditional automakers — who have lagged far behind Tesla on electric vehicles — are gradually eating into Tesla's market dominance. According to the latest data from Cox, Tesla accounts for 46.2% of EV sales in the U.S.; that figure used to be nearly 80%. GM now controls 13% of that market.
Globally, meanwhile, Chinese EV makers are ascendant.
Thomas Monteiro, a senior analyst at Investing.com, saw a silver lining in the latest earnings, including margin deterioration that "appears to have come in at the lower end of the curve."
"Although still far from what fundamentals would suggest for a trillion-dollar company, Tesla's latest numbers do spark some optimism, indicating that the worst is likely behind it—at least in terms of the core auto business," he wrote in a note.
Tesla, which has long been known for a high rate of executive turnover, lost three senior leaders in the last two months.
The company also worried investors earlier this month when it failed to announce its annual shareholder meeting. Tesla is incorporated in Texas, where state law requires the company to hold the meeting within 13 months of the previous one. That meant a deadline of July 13.
On July 9, with no word from Tesla about the meeting, a group of large shareholders sent Tesla's board a letter raising concerns about the oversight. One day later, the company announced it was pushing its annual meeting back to November.
Tesla's share price ticked down slightly in after-hours trading following the news.
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