Tesla Q2 slumps: double-digit drops as Musk pitches big dreams!

Post-market Wednesday ET, electric vehicle giant Tesla released its Q2 earnings report. Amid ongoing vehicle sales declines, Tesla’s Q2 revenue and net profit both fell double digits.

As of this writing, Tesla’s stock has dropped over 4% post-earnings release.

 

The report showed Q2 revenue at $22.496 billion, down 12% year-over-year, missing the market expectation of $22.826 billion; net profit at $1.172 billion, down 23%, slightly above the expected $1.136 billion; and adjusted EPS at $0.40, down 23% from last year, below the anticipated $0.42.

 

Tesla’s Q2 automotive revenue was $16.661 billion, a 16% year-over-year decline, following a 20% drop in Q1.

 

Tesla attributed the revenue and profitability decline to lower sales and reduced carbon credit income. The company earned $439 million from carbon credits paid by other automakers, less than half of last year’s $890 million.

 

However, this carbon credit revenue is expected to drop further due to recent U.S. federal tax law changes that eliminated many EV subsidies and renewable energy tax credits, reducing traditional automakers’ need to buy credits.

 

The $7,500 tax credit for U.S. EV buyers will expire in October, potentially forcing Tesla to cut prices further, squeezing profit margins.

 

Since last fall, Tesla’s financial health has worsened. CEO Elon Musk’s deep involvement in U.S. partisan politics has sparked consumer boycotts in multiple regions, severely damaging the brand’s reputation.

 

Musk exited the Trump administration in May and has since clashed with the president, exacerbating the brand crisis. On Wednesday, White House Press Secretary Levitt stated she believes President Trump opposes federal agencies contracting with Musk’s AI company.

To attract buyers, Tesla rolled out updates and financing incentives. Since March, the company refreshed its popular Model Y crossover SUV, upgraded luxury models Model S and Model X, and released a stripped-down, lower-priced Cybertruck.

 

Despite these efforts, Tesla delivered only 384,122 vehicles in Q2, down 13.5% from last year’s 443,956.

 

Musk urged investors to focus on Tesla’s autonomous driving and robotics businesses. In June, Tesla launched a Robotaxi pilot at its Austin headquarters, limited to invited users at $6.90 per ride, up from $4.20 a few weeks ago.

 

Tesla reiterated Wednesday: “We will continue to improve and expand this service (more vehicles, wider areas, eventually removing safety staff) and conduct tests in other U.S. cities to prepare for broader rollout.”

 

During the earnings call, Musk said the company aims to make autonomous ride-hailing available to about half of the U.S. population by year-end. “I believe we can achieve this technically.”

 

He claimed to be seeking Robotaxi regulatory approval in the San Francisco Bay Area, Nevada, Arizona, Florida, and other regions.

 

Musk also said the company is recalibrating Optimus 3, targeting mass production next year, with a goal of reaching 1 million humanoid robots annually within five years.