Tesla profits crash as Elon Musk fallout hits brand and bottom line
Tesla reported a sharp decline in first-quarter profit on Tuesday, missing Wall Street estimates as the electric vehicle maker continued to grapple with slowing demand, rising competition, and mounting brand headwinds tied to chief executive Elon Musk’s political activities.
Net income nosedived 71 per cent year-over-year to $409m (£307m) while revenue fell nine per cent to $0.27bn, missing consensus estimates of $0.43bn.
Operating income dropped 66 per cent to $0.4bn, while the company’s operating margin narrowed to 2.1 per cent from 11.4 per cent a year earlier.
The EV carmaker delivered 336,681 vehicles during the quarter, down 13 per cent, marking the weakest delivery performance since 2022.
Tesla cited reduced average selling prices, a temporary drop in demand due to the changeover to its latest vehicle model, the Model Y, and elevated operating expenses, particularly in AI and research, as contributors to the weak performance.
The automotive giant failed to offer financial guidance for the next quarter, citing a “rapidly evolving” trade and political landscape.
Despite its earnings miss, Tesla shares rose in after-hours trading as expectations had been significantly lowered after the firm’s dismal delivery numbers earlier this month.
Elon Musk to scale back government role
On an investor call, the world’s richest man and once one of Trump’s most high-profile allies, announced he will scale back his controversial role as head of government “efficiency”.
Once granted near-unfettered access to the West Wing, Musk’s step down will start in May, spending just one or two days a week advising the white house on efficiency initiatives.
His remarks come as the chief executive garnered criticism over the past few months that his political alignment with the Trump administration has damaged his EV brand and alienated its core customers.
“The work necessary to get the government’s financial house in order is mostly done”, he said. “My time allocation to DOGE will drop significantly”.
The former Trump darling’s role in Washington, which is officially capped at 130 days, has drawn backlash from investors and consumers alike.
Industry analysts have cited Elon Musk’s political affiliations as a key reason for deteriorating brand sentiment and flagging global demand.
Brand fallout and consumer backlash
Tesla’s image as a pioneering clean-energy brand has been eroded by its chief executive’s high-profile political involvement, rogue commentary, and unvetted policy blasts on X.
In Europe, Tesla sales are down nearly 45 per cent year over year, according to data from the European Automobile Manufacturers Association (ACEA).
In North America, the company faces growing discontent from owners, with reports of vandalism and cancelled deliveries on the rise.
“The brand has become inseparable from Musk’s political persona” said Gabor Schreier, chief creative officer at Saffron. “For many early adopters, the Tesla badge now carriers political weight – and not the kind that helps sell cars”.
Tesla also recalled nearly 46,000 cyber trucks last quarter – virtually all that had been sold – while the company was dropped from Vancouver international auto show’s lineup and consumer protests.
Cheaper EVs and robotaxis ahead
Despite current headwinds, Elon Musk tried to maintain an optimistic tone about the future, reaffirming Tesla’s commitment to launching a more affordable EV platform in the first half of 2025 and predicting a roll-out of fully autonomous vehicles by year-end.
“The future for Tesla is better than ever”, Musk said. “We expect millions of Teslas operating fully autonomously in the second half of the year”.
Tesla also highlighted continued growth in its energy division, which deployed increasing energy storage in the quarter.
The company ended the first quarter with $37bn in cash and investments.
Still, analysts caution that a full recovery will depend on Musk’s ability to regain focus on core operations and repair Tesla’s damaged brand.
“If Musk steps away from the white house, there may be lasting brand damage – but Tesla will at least have its most important strategic thinker back at helm”, Wedbush analysts said in a note.
Tesla shares have fallen by 50 per cent since December 2024, though some retail investors continue to see the pullback as a buying opportunity.
According to AJ Bell analysts, three times as many DIY investors bought Tesla shares as sold them over the past three months.