Tesla’s Nightmare Continues As Musk Warns of “Rough Quarters”Ahead

Tesla’s second-quarter earnings paint a grim picture: falling profits, slumping sales, and a reputation hit that keeps on hurting.

The all-electric carmaker reported net income of $1.17 billion, down 16.3% from the same period in 2024. Revenue fell 12% to $22.5 billion from $25.5 billion a year earlier, marking Tesla’s second consecutive quarter of declining profits and revenue this year.

The cause is clear: Tesla is selling fewer cars and cutting prices to chase demand. Deliveries fell 13.5% in the second quarter, showing how steep the drop has been.

Tesla’s troubles are about more than economics. CEO Elon Musk has become one of the most polarizing figures in the corporate world. His political pivot—spending nearly $290 million to help Donald Trump return to the White House in 2024 and later joining Trump’s administration as head of the Department of Government Efficiency (DOGE)—sparked global backlash. The infamous DOGE began aggressively cutting federal agency budgets, sparking protests outside Tesla showrooms worldwide and, more importantly, alienating the company’s core customer base. By becoming a prominent face of the administration and championing right-wing causes, Musk has pushed away the liberal buyers in the U.S. and Europe who once formed the bedrock of Tesla’s support. Sales took a hit.

Musk resigned from DOGE in May to refocus on Tesla, but the damage lingers. Adding to the drama, he recently launched a new political party, the American Party, vowing to field candidates in the 2026 midterm elections after falling out with Trump.

“We probably could have a few rough quarters. I’m not saying that we will, but we could,” Musk admitted on the earnings call with analysts.

The road ahead looks brutal. President Trump’s “One Big Beautiful Bill,” signed on July 4, kills the $7,500 federal EV tax credit as of September 30. That means Teslas are about to get pricier. The same law scraps clean-air penalties for automakers who fail emissions standards, ending a key Tesla revenue stream from selling regulatory credits to competitors. In Q2, those credit sales were slashed nearly in half, falling to $439 million from $890 million a year earlier.

“The One Big Beautiful Bill has a lot of changes that would affect our business in the near term,” CFO Vaibhav Taneja told analysts. Tesla, which manufactures most of its U.S. cars in Fremont, California, and Austin, Texas, still relies heavily on imported raw materials and components, leaving it vulnerable to tariffs.

“We started seeing the impact of tariffs,” Taneja said. “Sequentially, the cost of tariffs increased around $300 million with approximately two-thirds of that impact in automotive and the rest in energy. However, given the latency in manufacturing and sales, the full impact will come through in the following quarters.”

He warned: “Costs will increase in the near term. While we are doing our best to manage these impacts, we are in an unpredictable environment on the tariff front.”

The combination of slowing demand, price cuts, disappearing EV incentives, and rising tariffs suggests Tesla’s earnings pain isn’t going away soon. But on Wednesday’s earnings call, Musk once again pitched his vision of Tesla’s future, not as a car company, but as a robotics and AI powerhouse built on humanoid robots, automation, and self-driving tech.

The problem? Tesla’s late-June robotaxi launch in Austin showed how far behind it is. Waymo, Google’s self-driving subsidiary, already operates fully autonomous robotaxis across multiple U.S. cities and covers more than twice Tesla’s Austin service area. Tesla’s small fleet, meanwhile, is invite-only and still requires a human supervisor in the passenger seat.