Tesla’s declining sales figures have brought the company closer to financial instability than it has been in recent years, according to financial results released on Tuesday. This development poses a threat to one of Tesla’s key competitive advantages in the electric vehicle (EV) industry.
The electric automaker announced a net income of $409 million on $19.3 billion in revenue, following deliveries of nearly 337,000 EVs in the first quarter of the year. This net income represents a 71% decrease from the same period last year, marking Tesla’s worst delivery quarter in over two years. This downturn follows Tesla’s first-ever year-to-year decline in sales. The company’s income was bolstered by selling $595 million in zero-emissions tax credits; without these, Tesla would have experienced a loss.
Tesla also issued a warning to shareholders regarding potential impacts from the ongoing trade war. The company expressed concerns that President Trump’s tariffs and changes in political sentiment could significantly affect demand for its products. It cautioned that the current tariffs, mainly targeting China, could have a relatively larger effect on its Energy business compared to its automotive sector. Tesla stated that it is taking measures to stabilize its business in the medium to long term but also warned that it is uncertain whether sales growth will occur this year.
The company is continuing with its plans to produce more affordable models, stating that it remains on track to start production within the first half of 2025. These vehicles will feature elements of a next-generation platform used in the robotaxi but will be built on the existing platform that powers the Model Y and Model 3. According to Tesla’s shareholder letter, these newer, less expensive vehicles will be manufactured on the same lines as the current vehicle lineup. This statement contradicts a recent Reuters report that suggested a delay in the launch of these new EVs by several months.
Tesla is currently facing several headwinds with its sales. The aging lineup of its EVs, despite recent facelifts for its sedans and SUVs, remains a challenge, and the new Cybertruck is not meeting the expectations set by CEO Elon Musk. Additionally, Musk’s political views and his association with the Trump administration have sparked significant backlash against Tesla’s brand.
Meanwhile, Musk has directed the company’s focus towards its Robotaxi and Optimus robot projects. He has promised to introduce an initial version of the Robotaxi service in Austin this June, with potential expansion to other cities by the end of the year, although details of the project’s functionality remain sparse. Despite years of assurances from Musk, Tesla has yet to demonstrate that its vehicles can operate autonomously without human intervention. Moreover, internal analysis reportedly suggests that the Robotaxi program could incur prolonged financial losses even if it becomes operational.
Tesla also faced challenges in the prior year, with profits declining by 55% to $1.13 billion in the first quarter of 2024 compared to the same period in 2023. The company attributed this decline to a prolonged EV price-cutting strategy and several unforeseen challenges that impacted its financial performance. Attempts to regain profitability were met with continued pressure, as evidenced by a 45% drop in profit to $1.5 billion in Q2 of 2024 compared to 2023. Profits during this period were affected by a $622 million restructuring charge, although they were supported by a record $890 million in regulatory credit sales.
