Tesla reported a sharp year-on-year decline in first-quarter earnings, driven by a fall in deliveries, partly linked to CEO Elon Musk’s political involvement. Revenue and net income both came in well below analysts’ expectations, as factory retooling for new models and macroeconomic uncertainty dampened demand.
Despite the disappointing results, Tesla’s shares jumped more than 5% in after-hours trading, amid a broader rally in equity markets triggered by US President Donald Trump’s remarks that he had no intention of dismissing Federal Reserve Chair Jerome Powell. Nevertheless, Tesla’s shares remain down 34% year-to-date, making it the worst performer among the so-called Magnificent Seven tech stocks.
Tesla’s earnings fall sharply
In the first three months of the year, Tesla’s automotive revenue declined 20% year-on-year to $14 billion (€15.9 billion), while earnings per share dropped 40% to $0.27 (€0.31). Total revenue fell 9% from a year earlier to $19.3 billion (€21.9 billion). Meanwhile, revenue from energy generation and storage rose by 67%, achieving “a fourth sequential record for Powerwall deployments.”
In its earnings report, the company attributed the revenue decline to reduced vehicle deliveries, “in part due to the Model Y update across all four vehicle factories, reduced vehicle average selling price due to mix and sales incentives,” and negative foreign exchange impacts. However, growth in energy generation and storage services, along with increased regulatory credit revenue, helped to partially offset the drop.
Tesla delivered 336,681 vehicles in the first quarter, down 13% from a year earlier and marking the weakest quarter since 2022. It is worth noting that the first quarter is typically Tesla’s seasonally weakest.
While the energy segment continued its steady growth, supply constraints and tariffs are expected to impact battery production. “Megafactory Shanghai will be an important asset for meeting global energy storage demand during a time of uncertain cost structure in the US,” the company noted. CFO Vaibhav Taneja said on the earnings call that tariffs’ impact on the energy business is “outsized” because China supplies the majority of battery cells. US-made cells represent only a small proportion of the segment, while sourcing from non-China suppliers “will take time”.
Musk addresses political backlash
Tesla’s brand has come under pressure due to Musk’s political activity both domestically and internationally. Protests have taken place outside Tesla showrooms in the US, Europe, and Australia. Musk’s support for Germany’s far-right AfD party and his involvement in advising Trump on major federal job cuts have drawn widespread criticism.
On the earnings call, the CFO said “the negative impact of vandalism and unwarranted hostility towards our brand and people” in certain markets had weighed on deliveries. Musk claimed—without evidence—that the protestors were being paid: “because they’re receiving fraudulent money” or are “recipients of wasteful largesse”.
Musk confirmed that the time he spends on the Department of Government Efficiency (DOGE) would decrease “significantly” starting in May. He plans to spend “a day or two per week” on his government role, “for as long as the president would like me to do so”. At an event in Wisconsin earlier this month, he said his government service was “costing me a lot to be in this job.” He also reaffirmed support for “predictable tariff structures, free trade, and lower tariffs,” and claimed to have provided advice to the US president. However, he added, “I am not the president.”
Robotaxi and Optimus
Previously, Musk had stated that unsupervised Full Self-Driving (FSD) would launch in California and Texas by June. The service is also scheduled to debut in Austin and will feature the Model Y equipped with a “localised parameter set”. He now says Tesla’s Robotaxi service will be available in several cities later this year.
In addition, Musk noted that production of Tesla’s AI-powered humanoid robot, Optimus, has been impacted by magnet supply issues, which may lead to delays. China recently imposed restrictions on rare earth exports in retaliation for Trump’s tariffs as the US–China trade war escalates. Tesla had previously aimed to produce several thousand Optimus robots this year.
