Tesla struggling with plunging profits, Musk promises to refocus on business

Confirming expectations, Tesla’s finances have fared poorly at the start of 2025. The pioneering EV maker saw net income fall by 71% to just $409 million during the first quarter. If it weren’t for regulatory credits, the company would report losses, which means that its car-making business is currently in the red.

Musk wants to fix things by diluting his role in the Trump government, while he managed to soothe investors by once again propagating the arrival of full self-driving. 

A combination of financial strain, brand erosion, and leadership distractions forms the dark clouds above Tesla’s headquarters in Austin, Texas. This week, the electric vehicle giant posted a bruising first-quarter earnings report, revealing sharp declines in revenue and profit and a significant dip in vehicle deliveries. 

Market wins, Tesla loses

For the first quarter of 2025, Tesla reported revenue of $19.3 billion, down 9% from last year. As mentioned above, the company’s net income fell even more dramatically, plunging by 71%. This means Tesla misses projections, as analysts had anticipated stronger results, expecting $21 billion in revenue. 

The results reflect a difficult quarter in which the automaker delivered 336,681 vehicles globally—a 13% decline from Q1 2024 and the lowest figure Tesla has posted since mid-2022.

Tesla’s struggles have become more pronounced because the broader global EV market continues to expand. Industry rivals, including BYD, Hyundai, and traditional automakers like Volkswagen and Ford, are gaining ground as they ramp up EV production and offer competitive alternatives.

Tesla, long considered the frontrunner in the EV space, is now contending with slowing sales and mounting criticism of its CEO’s pastime under the Trump administration.

Politics take their toll

Yet, in typical fashion, Elon Musk sought to redirect the conversation during the company’s earnings call, leaning on his well-worn playbook of self-driving promises and deflecting blame for Tesla’s troubles onto political opponents and protesters. His political endeavors don’t seem to be the issue.

It’s clear, however, that Musk’s growing association with right-wing politics has damaged Tesla’s brand reputation. Incidents of vandalism at Tesla showrooms, charging stations, and vehicles have risen, and reports suggest an uptick in Tesla owners trading in their cars, citing discomfort with Musk’s political affiliations.

His role as head of the so-called Department of Government Efficiency (DOGE)—an advisory board created by former President Donald Trump to identify waste in federal spending—has also drawn sharp criticism. 

During the earnings call, Musk wasted no time addressing this fallout. He opened the session by blaming “fraudulently funded” protesters for the backlash against him and the company. Without providing evidence, he claimed that these protesters are recipients of the “wasteful largesse” cut by DOGE. Nevertheless, he confirmed that he will regain his government responsibilities to refocus on Tesla.

Full self-driving this year?

This news reignited investors’ confidence, as Tesla’s stock rose 4% in after-hours trading. Musk’s reiterating claims about the arrival of Tesla’s self-driving technology further fueled that optimism.

Musk confirmed plans to launch a paid autonomous ride-hailing service in Austin this summer. The project will start with a small fleet of 10 to 20 Model Y vehicles operating within a geo-fenced area under teleoperation support. 

Musk went one step further and envisioned that the first self-driving Model Y would leave the factory hall and deliver itself to its customer by the end of the year. However, it’s not clear whether this stunt involves remote operators, as Tesla did with the Optimus robot. 

The government keeps Tesla profitable

Musk then forecasted that Tesla’s self-driving technology would begin contributing to company profits by mid-2026, once again making the now-routine claim that “millions” of Tesla robotaxis would be operational by the second half of next year.

Musk has been making similar statements for nearly a decade, none of which have materialized. Still, investors continue to give him the benefit of the doubt.

Musk further boasted that Tesla would capture a “90-something percent market share” of the autonomous vehicle market and criticized competitors like Waymo for being too expensive.

However, the biggest irony of the earnings call was tied to Tesla’s profitability. Tesla’s Q1 net income was entirely dependent on $595 million in sales of regulatory CO2 credits—basically, competitor carmakers who pay Tesla to avoid carbon fines.

Without these, Tesla would have posted a loss of $189 million. This reliance on government incentives starkly contrasts with Musk’s political rhetoric against government spending and his depiction of protesters as recipients of “fraudulent money.”