Tesla sales suffer biggest fall in decade as Elon Musk warns of more ‘rough quarters’ ahead

AUSTIN - Tesla fell short of Wall Street’s expectations in one of the automaker’s worst quarters in years, a sign of the toll that rising competition and a backlash against chief executive officer Elon Musk have taken on the company.

Sales fell 12 per cent to US$22.5 billion in the second quarter, the sharpest decline in at least a decade.

The electric vehicle (EV) company made US$1.2 billion (S$1.5 billion), down from US$1.4 billion a year earlier. It has not reported an increase in quarterly profit since the third quarter of 2024.

While the report was free of new bombshells and Tesla continues to

move forward with robotaxi

and affordable-vehicle plans, the company’s call with analysts ultimately failed to assuage concerns about the path forward.

An unusually subdued Elon Musk predicted the robotaxi service will expand to new cities by the end of the year, but warned that expiring incentives for EVs will have an impact on its core automotive business. 

The company’s revenue drop was due to a decline in vehicle deliveries, lower regulatory credit revenue and a lower average selling price for its cars. Tesla also reported falling sales from energy generation and storage.

It saw a boost from the business segment that includes its supercharging network, but chief financial officer Vaibhav Taneja warned that the recently passed US tax-and-spending Bill, as well as US President Donald Trump’s tariffs, will hurt demand. 

The shares slipped during the company’s conference call, sliding 5.2 per cent in extended trading on July 23. The stock has fallen 18 per cent since the start of 2025 but has largely rebounded from lows in March and April. 

Some investors are looking past Tesla’s uneven financial results and towards Mr Musk’s promises of a future built around artificial intelligence, humanoid robots and self-driving technology.

“If one thinks Tesla is at its core just an auto business, then the results were poor,” Mr Adam Crisafulli, founder of the market intelligence firm Vital Knowledge, said in a research note. “If one thinks Tesla is an AI/robotics juggernaut, then you will probably feel the same about its prospects after the Q2 release as you did before.”

Mr Musk reiterated the importance of autonomous driving and the company’s Optimus robot programme. 

“If Tesla continues to execute well with vehicle autonomy and humanoid robot autonomy, it will be the most valuable company in the world,” Mr Musk said during the call. He added that “there will be some teething pains” as Tesla invests in robotics and autonomous driving. 

Mr Musk also voiced concerns about the size of his stake in the company – suggesting it should be larger in order to prevent his potential ouster from an activist investor. His multi billion-dollar Tesla payout was gutted by a Delaware judge late in 2024. The company is still appealing the ruling and has moved its incorporation to Texas.

“I think my control over Tesla should be enough to ensure that it goes in a good direction, but not so much control that I can’t be thrown out if I go crazy,” Mr Musk said. 

Tesla’s brand has become increasingly polarising following Mr Musk’s support of US President Donald Trump. During his brief role helping the administration,

Mr Musk’s attempts to slash government spending

generated criticism from many of Tesla’s traditionally left-leaning consumers, while some investors worried the project was a distraction.

Revenue from regulatory credits – an area that has become a significant revenue stream for the company – fell more than 26 per cent to US$439 million in the second quarter. That’s down from US$595 million in the first quarter and US$890 million in the same period a year earlier. 

That income is expected to drop sharply as the Trump administration eliminates penalties for automakers that fail to meet federal fuel economy standards. 

Investors are still eager for more details on robotaxis’ path forward, including how quickly the service can grow in Austin and go to other cities. The company said it aims to further improve and expand the service, but didn’t give timelines or specific locations. 

Tesla also reported the “first builds of a more affordable model in June.” The company had previously said production of its more-affordable model would begin in the first half of 2025. The model is seen as a key factor to helping reverse the company’s recent sales declines.

“The guidance was very sparse,” Mr Ben Kallo, senior analyst at Baird, said in an interview. He added that the company offered fewer forward-looking details than in the previous quarter. 

“All in all, not a lot of fireworks,” he said. BLOOMBERG