Tesla results, reported late on Tuesday, were a car crash that would ordinarily have a company’s shareholders baying for the boss to be given their pink slip.
Revenues for the first quarter slid 9 per cent on the year to $19.3 billion (€17 billion) to miss consensus expectations by $2 billion. Earnings per share sank 40 per cent to 27 US cents, falling short of estimates by a third. And the group suspended its previous full-year guidance for a return to car sales growth in 2025, after falling last year for the first time in almost a decade, blaming uncertainty caused by shifting global trade policy.
But shares in the electric vehicle (EV) maker rallied 5 per cent the following day, as Elon Musk said he would be giving the company he had led since 2008 more attention as he steps back from his role as Donald Trump’s chainsaw-wielder-in-chief at the controversial Department of Government Efficiency, or Doge.
That added $7.5 million to the wealth of Musk, who owns 12.8 per cent of the carmaker, leaving him $200 billion richer than Amazon boss Jeff Bezos, the world’s second-richest man. Still the stock is languishing almost 50 per cent below its peak last December, when Musk basked in Trump’s inner circle and stock market investors were betting on how his political sway would help his business.
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Tesla’s faithful were encouraged this week, too, by Musk talking up its artificial intelligence (AI) future, vowing to launch a long-delayed pilot driverless taxi – known alternately as robotaxi or cybercab – by June, in Austin, Texas. He promised the group would begin volume production in 2026, which will “move the financial needle in a significant way” by late that year.
He also said Tesla hopes to start unleashing an army of humanoid robots – known as Optimuses, which would be capable of everything from performing household chores to working on factory assembly lines – for sale to other companies starting next year.
“Long term, our view continues to be that Tesla is well positioned as a technology platform to leverage end-to-end AI into a leading position in autonomous driving and humanoid robotics,” said Deutsche Bank analyst Edison Yu in a report, adding that Tesla’s EV, energy storage, robotics and robotaxi units are tapped into four megatrends. His $345 price target points to 33 per cent upside for Tesla.
But Musk’s visionary thinking has long been overshadowed by his destructive myopic impulses.
Tesla’s deliveries fell over 12 per cent on the year in the first quarter to an almost three-year low of 323,800 vehicles as Musk torched the reputation of the brand with his increasingly erratic and divisive behaviour as Trump’s sidekick.
[ Tesla’s troubles mount as Musk’s politics take a tollOpens in new window ]
The drop was most pronounced in Europe, where vehicle sales fell 37 per cent on the year in the first quarter, led by Germany, where sales plunged 62 per cent, as Musk’s endorsement of the far-right Alternative für Deutschland (AfD) generating significant backlash.
He can’t help himself. Even on the very day that Tesla reported its dire results – and Musk sought to strike a “mea culpa” tone on an earnings call with analysts for the distraction of Doge – he was on X, his social media company, retweeting reports of an AfD surge in the German polls and trolling liberal types, Tesla’s traditional target market.
Hopes in some quarters that Musk might be able to dissuade Trump from resorting to tariffs – he told investors on Tuesday that he was “an advocate for free trade and lower tariffs” and that he had made his “opinion clear to the president” – may prove to be misplaced.
Back at Tesla, Musk continues to dangle a future world of steering wheel-less cars and robots folding your laundry. But the company is paying the price for how he had taken his eye off the road with the group’s here-and-now business long before joined the Magasphere.
Tesla is struggling with a dated selection of models that are being outmanoeuvred by China’s BYD, in particular, with its line-up of newer and more affordable cars. BYD’s sales topped Tesla’s $97.7 billion last year.
The launch of Tesla’s long-promised affordable version of Model Y, its bestselling car, continues to drift.
[ Elon Musk forced back to the boardroom as Doge ‘blowback’ pummels TeslaOpens in new window ]
For HSBC analyst Michael Tyndall, Tesla’s problems are structural.
“An ageing product portfolio, increasing competition, not just in China, but also from traditional [carmakers] in the US and Europe, and brand issues continue to weigh on Tesla,” he said in a report on Thursday, which offered a share price forecast that points to a 50 per cent downside from here.
While traditional carmakers trying to play catch-up on the electric vehicles front may be salivating at Musk’s brand issues, some have spotted more worrying signs in Tesla’s figures for the wider EV sector.
Morgan Stanley number cruncher Adam Jonas reckons Tesla’s 12.5 per cent first-quarter gross auto margin, its lowest level in a dozen years, is lower than almost any big carmaker. It would point to a loss-making operating margin – especially when the dealer cut that Tesla enjoys is stripped out. Unlike traditional carmakers, Tesla sells directly to customers, cutting out the middleman.
“Considering Tesla’s enormous scale, low-cost designs and applied efficiencies of manufacturing, this really does say something,” Jonas said. “Other auto companies who target strong (or even positive) margins from their EV businesses should ask themselves ... If Tesla can’t make money with EVs, what makes us think we can?”
