Tesla profit drops again as Musk warns of ‘Rough' quarters ahead

Tesla reported another decline in quarterly profits on Wednesday, as CEO Elon Musk cautioned that the company may face several difficult quarters ahead, following the elimination of federal electric vehicle (EV) tax credits under President Donald Trump’s new fiscal package.

Speaking on an earnings call with analysts, Musk acknowledged near-term challenges but reaffirmed his long-term optimism, citing Tesla’s technological edge in autonomy and robotics. However, he noted that the expiration of the $7,500 federal tax credit for EVs on September 30 could significantly impact short-term demand.

“We probably could have a few rough quarters. I'm not saying we will, but we could,” Musk said. He added that Tesla's financials would become "very compelling" once the company scales autonomous driving, expected by the second half of 2026.

The warning comes after Tesla posted its third consecutive quarterly profit decline. Second-quarter net income fell 16% year-over-year to $1.2 billion, while revenue dropped 12% to $22.5 billion. The decline was attributed to a fall in vehicle deliveries, lower average selling prices, and rising R&D costs, particularly in AI.

Tesla declined to provide full-year production guidance, citing global economic uncertainties, shifting trade and fiscal policies, and progress on its autonomy initiatives.

Despite the earnings dip, Tesla emphasized its continued investments in artificial intelligence and robotics. The company recently launched a robotaxi service in Austin, Texas — its first fully autonomous transportation product after repeated delays.

Musk also highlighted Tesla’s Optimus humanoid robot and reiterated plans for a more affordable EV model. Tesla’s press release confirmed that production of the lower-priced vehicle began in June, with volume scaling expected in the second half of 2025.

Executives said the ramp-up was postponed to focus on producing current-generation models before the federal tax credit expires.

Tesla’s outlook has drawn mixed reactions from Wall Street. JPMorgan Chase analysts argue that Tesla’s stock is “completely divorced” from its deteriorating fundamentals, citing weakening EV demand and Musk’s distractions. In contrast, Morgan Stanley continues to rate Tesla as a “top pick” for its leadership in AI and robotics, though it flagged Musk’s political controversies as a risk factor for investors.

Musk’s growing involvement in U.S. politics has added to Tesla’s challenges. He played a major role in supporting Trump’s 2024 campaign and briefly joined the administration as head of the new “Department of Government Efficiency,” which slashed federal jobs — moves that led to protests and consumer backlash against Tesla.

Musk resigned from the White House in May and has since turned against Trump, criticizing his fiscal plan and launching a new political group, the “America Party,” on July 5. Trump dismissed the effort as “ridiculous” and has threatened to revoke Musk’s contracts and even consider deportation.

Tesla shares fell 4.1% in after-hours trading following the earnings release.