Elon Musk warned of a hard year ahead for Tesla, adding to the automaker’s woes after reporting one of its worst quarters of the last decade.
The chief executive pointed to the pending loss of electric vehicle (EV) incentives in the US and the lengthy process of rolling out driverless vehicles, saying it could be late 2026 before Tesla would have “compelling” economics again.
“Does that mean, like, we could have a few rough quarters?” Musk said on Tesla’s earnings call. “Yeah, we probably could have a few rough quarters.”
Tesla shares fell as he spoke, sliding as much as 5.3 per cent in postmarked trading Wednesday in New York. The stock already had tumbled 18 per cent this year through the close, even after rebounding from lows in March and April.
The company reported adjusted earnings of 40 cents a share, missing Wall Street’s already-lowered estimates. Revenue fell 12 per cent to $22.5 billion, the sharpest decline in at least a decade. The company was hurt by a slump in vehicle deliveries and a lower average selling price for its cars.
Tesla also reported falling sales from energy generation and storage and said costs from tariffs rose around $300 million (€249 million). The impact from the levies is expected to grow in the coming quarters.
Tesla’s traditional car-making business is struggling in the face of rising competition and continued fallout from Musk’s political activities. Investors have largely been willing to look past the sales decline and toward Musk’s promises of a future built around artificial intelligence, robots and self-driving technology, but the comments show there will be more turbulence before there’s any pay-off in these investments.
“There will be some teething pains” as the company invests in robotics and autonomous driving, Musk said.
On the conference call, executives spent relatively little time discussing the EV business, spending portions instead talking about a planned expansion of the newly launched robotaxi service, its new Tesla diner, and whether the company could invest in the CEO’s new AI start-up.
Musk also reiterated his desire for a greater ownership stake in Tesla – suggesting it should grow in order to prevent his ouster from an activist investor. His multibillion-dollar Tesla payout was gutted by a Delaware judge late last year, and the company is 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,” Musk said.
Tesla’s brand has become increasingly polarising following Musk’s support of Trump. During his brief role helping the administration, 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. A number of analysts have adjusted their expectations downward in recent weeks.
Chief financial officer Vaibhav Taneja warned that the recently passed US tax-and-spending bill will hurt demand. Revenue from regulatory credits – an area that has become a significant revenue stream for the company – fell more than 26 per cent to $439 million in the second quarter. That’s down from $595 million in the first quarter and $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. Trump and Musk have clashed since last quarter, when the Tesla CEO said he would be significantly reducing his time in Washington.
Tesla also reported the “first builds of a more affordable model in June.” The company had previously said production of its long-awaited more-affordable model would begin in the first half of this year. The model, which Musk said would resemble a Model Y, is seen as a key factor to helping reverse the declining sales.
On the company’s robotaxi, Tesla said it aims to further improve and expand the service, which began this summer in Austin. Future growth could be in California, Nevada, Arizona and Florida, he said.
Executives estimated the network could reach “half of the population of the US by the end of the year,” but the company will still need certain regulatory approvals, including for the Bay Area, where Musk said the company would expand to next.
Gene Munster, managing partner at Deepwater Asset Management, said Tesla offered positive comments on areas such as its driver-assistance program and robotaxi – but noted investors were looking for more near-term specifics on autonomy.
“All eyes are on how Austin is going to play out and we didn’t hear much,” Munster said. He said Tesla offered little on key robotaxi milestones, such as how the company will scale its fleet.
“Investors were hoping to hear something and they didn’t hear it,” he said. – Bloomberg
