Tesla profit tumbles as Musk’s political focus clouds company outlook
Tesla’s earnings are slipping, sales are slowing, and investors are starting to worry. Elon Musk’s political detours may be making matters worse.
- Jul 24, 2025,
- Updated Jul 24, 2025 12:17 PM IST
Tesla has reported a sharp drop in profits and sales for the second quarter of 2025, reinforcing concerns that CEO Elon Musk’s growing political involvement is distracting from the company’s core business.
The electric vehicle maker posted net income of $1.17 billion on revenue of $22.5 billion for the quarter, narrowly beating analyst expectations but still marking a 12 percent decline compared to the same period last year. Automotive revenue fell 16.6 percent year over year to $16.6 billion. Tesla also reported a 16 percent drop in overall net income and a staggering 42 percent plunge in operating income, now below $1 billion.
Deliveries totalled 384,122 vehicles, down 14 percent from the second quarter of 2024. For a company that sells directly to customers, deliveries are a direct indicator of sales performance.
Tesla’s finances were partially propped up by $439 million in regulatory credit sales to other automakers, a revenue stream that is expected to diminish significantly after US lawmakers backed President Donald Trump’s plan to remove penalties for breaching fuel-efficiency rules.
In a concerning sign for long-term stability, Tesla’s free cash flow dropped to just $100 million and the company’s cash reserves shrank by $200 million to $36.8 billion. Analysts have warned that Tesla’s cash flow could turn negative by the end of the year, potentially impacting its stock.
The company says it has completed the first builds of a lower-cost model in June, with full-scale production planned for the second half of 2025. However, the upcoming model is said to be a simplified version of the existing Model 3 and Model Y rather than an entirely new vehicle, a move that may disappoint investors hoping for product innovation. Tesla also said its Semi and Cybercab projects remain on track for volume production in 2026.
Tesla’s report hints at growing challenges. The company noted the impact of “political sentiment” and “economic uncertainty” stemming from the Trump administration’s trade policy, though it stopped short of addressing Musk’s own political profile or waning public appeal.
Musk recently stepped away from his controversial role leading the Department of Government Efficiency (DOGE), a Trump-era programme focused on cost-cutting in government, which has attracted criticism for eliminating humanitarian aid and laying off thousands of federal workers. Still, he continues to mix business with politics, recently announcing plans to launch a new political outfit called “the America Party.”
In the meantime, Tesla has begun offering significant discounts and financing deals across its lineup in a bid to boost sales ahead of a predicted slump later this year. Federal EV incentives are set to expire in September under a new budget law, likely pushing prices up and further dampening demand.
Musk continues to urge investors to focus on Tesla’s AI ambitions, particularly its self-driving technology and humanoid robot projects. The company recently launched a robotaxi pilot in Austin, Texas, although the rollout was limited to a select group of pro-Tesla influencers and required a safety monitor in each vehicle.
For Unparalleled coverage of India's Businesses and Economy – Subscribe to Business Today Magazine
Tesla has reported a sharp drop in profits and sales for the second quarter of 2025, reinforcing concerns that CEO Elon Musk’s growing political involvement is distracting from the company’s core business.
The electric vehicle maker posted net income of $1.17 billion on revenue of $22.5 billion for the quarter, narrowly beating analyst expectations but still marking a 12 percent decline compared to the same period last year. Automotive revenue fell 16.6 percent year over year to $16.6 billion. Tesla also reported a 16 percent drop in overall net income and a staggering 42 percent plunge in operating income, now below $1 billion.
Deliveries totalled 384,122 vehicles, down 14 percent from the second quarter of 2024. For a company that sells directly to customers, deliveries are a direct indicator of sales performance.
Tesla’s finances were partially propped up by $439 million in regulatory credit sales to other automakers, a revenue stream that is expected to diminish significantly after US lawmakers backed President Donald Trump’s plan to remove penalties for breaching fuel-efficiency rules.
In a concerning sign for long-term stability, Tesla’s free cash flow dropped to just $100 million and the company’s cash reserves shrank by $200 million to $36.8 billion. Analysts have warned that Tesla’s cash flow could turn negative by the end of the year, potentially impacting its stock.
The company says it has completed the first builds of a lower-cost model in June, with full-scale production planned for the second half of 2025. However, the upcoming model is said to be a simplified version of the existing Model 3 and Model Y rather than an entirely new vehicle, a move that may disappoint investors hoping for product innovation. Tesla also said its Semi and Cybercab projects remain on track for volume production in 2026.
Tesla’s report hints at growing challenges. The company noted the impact of “political sentiment” and “economic uncertainty” stemming from the Trump administration’s trade policy, though it stopped short of addressing Musk’s own political profile or waning public appeal.
Musk recently stepped away from his controversial role leading the Department of Government Efficiency (DOGE), a Trump-era programme focused on cost-cutting in government, which has attracted criticism for eliminating humanitarian aid and laying off thousands of federal workers. Still, he continues to mix business with politics, recently announcing plans to launch a new political outfit called “the America Party.”
In the meantime, Tesla has begun offering significant discounts and financing deals across its lineup in a bid to boost sales ahead of a predicted slump later this year. Federal EV incentives are set to expire in September under a new budget law, likely pushing prices up and further dampening demand.
Musk continues to urge investors to focus on Tesla’s AI ambitions, particularly its self-driving technology and humanoid robot projects. The company recently launched a robotaxi pilot in Austin, Texas, although the rollout was limited to a select group of pro-Tesla influencers and required a safety monitor in each vehicle.
For Unparalleled coverage of India's Businesses and Economy – Subscribe to Business Today Magazine