Shares drop 25% this year as Tesla shifts focus to automation and faces weak EV demand and lost credits
Tesla’s second-quarter profit dropped for the third straight quarter as Elon Musk shifted the company’s focus away from electric vehicle delivery growth and toward automation, amid softening demand, reduced regulatory support, and global competitive pressure.
As reported by The Canadian Press, revenue fell 12 percent to US$22.5bn in the April to June period, down from US$25.5bn a year earlier.
Net income declined 16 percent to US$1.17bn, or 33 cents per share. Gross margins also slipped to 17.2 percent, compared with 18 percent in the same quarter last year.
During the earnings call, Musk downplayed vehicle sales and instead prioritised autonomous mobility and robotics.
He said Tesla’s robotaxi service would be available to “half of the population of the US by the end of the year — that’s at least our goal, subject to regulatory approvals.”
Tesla launched a test version of its paid robotaxi program in Austin, Texas.
While the rollout has largely gone smoothly, there were incidents, including one robotaxi entering a lane for oncoming traffic.
Musk also projected growth in the company’s humanoid robot division, Optimus, saying production could scale to 100,000 units per month within five years.
The focus on automation comes amid weak EV sales in the US and Europe, where Tesla has lost market share to rivals such as BYD and Volkswagen.
As per Reuters, Musk’s public political endorsements in Europe have alienated some consumers, adding to sales headwinds.
Chatterjee, an analyst at Forrester, wrote that “the perception of Elon Musk, its chief executive, has rubbed the sheen right out of what once was a darling and soaring automotive brand.”
He added, Tesla is now “a toxic brand that is inseparable from its leader.”
Consumer sentiment has weakened broadly.
Reuters reported that firms across sectors — from automakers to airlines and food companies — have struggled with erratic US trade policy, cost volatility, and reduced consumer confidence.
Hyundai, for example, said US tariffs cost it USUS$606.5m in the second quarter.
Tesla’s business is also exposed to shifts in regulatory policy.
As reported by The Canadian Press, the recent US budget eliminated a federal tax credit of up to US$7,500 for EV buyers and removed penalties for carmakers exceeding emissions limits.
That directly impacts Tesla’s sale of carbon credits, which dropped to US$439m in Q2 from US$890m a year earlier.
Musk said, “We’re in this weird transition period where we’ll lose a lot of incentives in the US.”
He projected a few rough quarters through mid-2025, but added, “Once you get to autonomy at scale in the second half of next year… I would be surprised if Tesla’s economics are not very compelling.”
To counter weaker demand, Tesla delayed the launch of its more affordable model to the final quarter of the year, having initially promised it by June.
Musk also expects to secure European approval for Tesla’s Full Self-Driving software by year-end, though it remains a driver-assistance tool rather than a fully autonomous system.
Meanwhile, Tesla’s bitcoin holdings provided a short-term lift.
As reported by CNBC, Tesla recorded a US$284m gain on its digital assets in the quarter, bringing their value to US$1.24bn — up from US$722m a year ago.
But the gain was overshadowed by what CNBC called a missed opportunity. After selling 75 percent of its bitcoin in mid-2022, Tesla missed out on billions in additional gains.
The US$936m worth sold would be valued at more than US$3.5bn today, and its original holdings could have reached US$5bn.
Despite the company’s evolving strategy, Tesla’s stock is down 25 percent year-to-date, making it the worst performer among major tech firms.
Asked whether he planned to increase his 13 percent stake, Musk said, “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.”
