Automotive Sales Decline Again, Pressures Earnings
Tesla reported a significant 16% drop in automotive revenue in the second quarter, with total earnings and vehicle deliveries falling below analyst expectations. The company brought in $22.5 billion in revenue, missing the forecasted $22.74 billion, while adjusted earnings per share came in at 40 cents, slightly under the expected 43 cents.
Vehicle sales continued their downward trend, totaling 384,000 deliveries for the quarter. Automotive revenue dropped to $16.7 billion from $19.9 billion the previous year, while income from regulatory credits was halved to $439 million. Net income also declined to $1.17 billion, or 33 cents per share, compared to $1.4 billion in the same quarter last year.
Political Ties and Competition Weigh on Demand
Tesla’s slump this year is attributed in part to backlash in key markets following Elon Musk’s political alignments and controversial administrative role. Support for President Trump’s reelection and Germany’s AfD party, as well as Musk’s leadership of the U.S. Department of Government Efficiency, have drawn criticism and affected consumer sentiment, especially in the U.S. and Europe.
Meanwhile, Chinese competitors have gained ground with lower-cost EVs packed with advanced autonomous features, pushing Tesla to accelerate plans for a more affordable model. Tesla announced it began limited production of a budget-friendly vehicle in June, with full-scale output expected in the second half of 2025.
Robotaxi Strategy Advances Despite Skepticism
Attempting to shift focus toward its long-term vision, Tesla is expanding its experimental robotaxi service. The pilot, launched in Austin, Texas, uses human-monitored vehicles in a small area and is limited to select users. Tesla confirmed plans to broaden coverage and eventually remove human oversight as it prepares for further U.S. rollouts.
While Musk envisions robotaxis and humanoid robots as Tesla’s future revenue drivers, analysts remain cautious. Bank of America warned the robotaxi initiative may have limited financial impact in the near term, especially as Alphabet’s Waymo leads the commercial deployment in several cities.
Other Segments Show Modest Growth
Outside of automotive, Tesla’s services division delivered a 17% profit increase, largely driven by its EV charging network. The company added 2,900 Supercharger stalls in the quarter, an 18% annual growth, bringing the total to 7,377 stations. Digital assets also rose in value to $1.24 billion, nearly doubling from $722 million a year ago.
Despite challenges, Tesla continues investing in new initiatives and infrastructure to maintain its position in a rapidly evolving market. Executives are expected to address investor concerns and future plans during their scheduled earnings call.
