Tesla earnings plunge 71% as EV maker warns of tariff pain ahead

AUSTIN - Tesla backed away from an earlier view for 2025 sales growth and pledged to revisit its outlook next quarter, a sign that tariffs, an ageing vehicle line-up and the backlash against chief executive officer Elon Musk are having an impact on the electric-vehicle maker. 

The company’s first-quarter earnings plunged 71 per cent to US$409 million (S$536 million), down from US$1.4 billion in the same period a year ago, it announced on April 22.

Tesla omitted an earlier prediction that sales would return to growth for the full year, saying instead that it’s “making prudent investments that will set up” the vehicle business for growth. That will depend on factors including production increases and the “broader macroeconomic environment”.

“It is difficult to measure the impacts of shifting global trade policy on the automotive and energy supply chains, our cost structure and demand for durable goods and related services,” Tesla said.

Despite the weak results, Tesla shares rose 4.6 per cent in extended trading on April 22 after Mr Musk said he’ll start to pull back “significantly” his work with the US government starting in May.

Mr Musk oversees five companies: Tesla, SpaceX, XAI, Neuralink and The Boring Co. Tesla is the only publicly traded company in his empire, and it has borne the brunt of public protests against him. 

The EV maker’s dimmer outlook for the year follows a tough 2024, when it missed its annual sales growth target for the first time in more than a decade. Tesla reported earlier in April that first-quarter vehicle sales slid 13 per cent.

US President Donald Trump’s tariffs are compounding Tesla’s challenges, and threaten to upend automotive supply chains globally and drive up costs across the industry. While Tesla is expected to be relatively less affected than many carmakers due to its large plants in California and Texas, its vehicles nevertheless contain some non-US components, and the company has warned of a potential impact.

Mr Ben Kallo, a senior research analyst with Baird, said Tesla’s mention of tariffs is a way for the company to alert policymakers of the pain the levies are causing. 

“It’s a way to get the message across that tariffs are going to impact Elon without him saying that as part of the US government,” Mr Kallo said. “He’s walking a tight rope there while part of the government with Doge,” he added, referring to the Musk-led Department of Government Efficiency that Mr Trump created after taking office. 

Tariffs will have a “relatively larger impact” on the energy business compared to automotive, Tesla said. The company’s Megapack energy storage systems rely heavily on LFP battery cells from China, which accounted for 84 per cent of global lithium-ion battery production capacity in 2024, according to Wood Mackenzie. By comparison, North America made up just 5 per cent.

Consumer backlash

Mr Musk’s endorsement of controversial political positions in Europe and close ties to Mr Trump have also sparked a backlash globally. Tesla showrooms and charging stations have become targets for protests and vandalism, particularly in the United States. Tesla Takedown, a decentralised movement that accuses Mr Musk of harming democracies around the world, is encouraging people to sell their Tesla vehicles and the company’s stock while condemning violence and vandalism. 

Earlier this week, Wedbush Securities analyst Dan Ives wrote that Tesla faces “potentially 15 per cent-20 per cent permanent demand destruction for future Tesla buyers due to the brand damage Musk has created with Doge”. 

The company said that “changing political sentiment” is another element that “could have a meaningful impact on demand for our products in the near term”. 

Autonomy, robotics

Mr Musk is increasingly betting Tesla’s future on autonomy, such as a driverless taxi, and robotics, including the humanoid Optimus robot.

“While we continue to execute on innovations to reduce the cost of manufacturing and operations, over time, we expect our hardware-related profits to be accompanied by an acceleration of AI, software and fleet-based profits,” the company said in its shareholder deck.

The automaker said plans for new vehicles, including more affordable models, remain on track for the start of production in the first half of this year. That may come as a surprise to some investors after Reuters reported last week that the production launch would be delayed by a few months.

Tesla said it had already prepared its factories for the launch of new models during downtime while switching production lines over for the refreshed Model Y. It emphasised the need for more affordable options amid current economic uncertainty that has resulted from trade policies. BLOOMBERG