Tesla shares dropped by 10% in early trading on Thursday, following a noticeable sales decline—the most significant in over ten years. CEO Elon Musk warned this downturn might not be a quick fix.
The electric vehicle manufacturer saw a revenue drop of $16.7 billion from car sales, marking a 16% decline compared to the previous year. Additionally, Tesla fell short of Wall Street’s expectations for both earnings per share and overall earnings.
“We might face a few rough quarters,” Musk acknowledged during a revenue call on Wednesday. “Not that we will, but it’s possible.”
Tesla executives have highlighted the impact of tariffs and the anticipated end of the federal electric vehicle tax credit as key factors affecting sales.
Musk mentioned that these downward trends could possibly carry on into the fourth quarter or even into early 2026. He expressed hope for an expanded rollout of the Robotaxi autonomous driving service, which is expected to improve in the following year.
“If we achieve large-scale autonomy by late next year, I think it’d be hard not to find Tesla’s economics very appealing,” Musk said.
“It’s our goal to have autonomous passenger compartments available to about half of the U.S. population by year’s end, pending regulatory approval,” he added.
The recent tax law changes have removed the longstanding $7,500 credit that benefitted Tesla’s sales strategy.
Musk, who previously collaborated closely with Trump, warned that the new law could significantly inflate the federal deficit. Reports suggest Musk was frustrated about the elimination of the tax credits, something he denied.
This loss is just a part of Tesla’s challenges. Analysts point to the increasing competition from companies like BYD in China and Europe, alongside Tesla’s aging vehicle offerings and government efficiency struggles.
Tesla’s stock has declined by 20% since the year began.
In its recent quarterly results, Tesla reported adjusted earnings at 40 cents per share—less than the anticipated 43 cents. The overall revenue reached $22.5 billion, below the expected $22.74 billion.
Last month, Tesla projected a 14% decrease in vehicle deliveries year-on-year, with deliveries often closely reflecting sales performance.
Musk pointed to initiatives like the Robotaxi, which recently had a pilot launch in Austin, Texas, as well as Tesla’s Optimus Humanoid Robots, as crucial elements for the company’s future.
This week, Tesla also opened a diner in Hollywood, with plans to expand to more locations should it prove successful.
Despite the struggles, Wedbush analyst Dan Ives addressed his clients with a more optimistic outlook regarding Tesla.
“There are evident headwinds like tariffs and growth challenges over the next few months. Yet, Musk’s proactive approach in AI signifies potentially significant developments for Tesla investors,” he noted.
Musk has stated intentions to dedicate more time to Tesla after returning from Doge, although indications suggest he may still engage in political activities. He has announced plans to form an “American Party,” criticizing both major parties for not addressing the people’s needs.
