Finance
Tesla likely faces 'a few rough quarters' from end of US EV support, Musk says
Published by Global Banking & Finance Review®
Posted on July 23, 2025
5 min readLast updated: January 22, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on July 23, 2025
5 min readLast updated: January 22, 2026
Tesla anticipates tough quarters due to US EV support cuts. Elon Musk focuses on future autonomous driving revenue to offset challenges.
By Akash Sriram and Abhirup Roy
(Reuters) -Tesla Chief Executive Elon Musk said on Wednesday that U.S. government cuts in support for electric vehicle makers could lead to a "few rough quarters" for the company before a wave of revenue from self-driving software and services begins late next year.
Shares fell nearly 5% after Musk responded on a quarterly results conference call to questions about new U.S. government policies under President Donald Trump.
Musk's electric vehicle maker posted the worst quarterly sales decline in more than a decade and profit that missed Wall Street targets, but its profit margin on making cars was better than many feared. Musk is pursuing autonomous driving to power privately owned vehicles as well as robotaxis that it plans to put into production next year.
In the meantime, it is working on a new, cheaper car, though Chief Financial Officer Vaibhav Taneja said that production would ramp up next quarter, slower than initially expected. It produced some initial units by the end of June. The company did not provide an update on its full-year deliveries forecast, citing the economy and timing of the new car rollout.
"Tesla's disappointing results aren't surprising given the rocky road it's traveled recently," said eMarketer analyst Jacob Bourne. "A truly affordable model will hit the bullseye in terms of boosting sales if Tesla can effectively position it right without detracting from its higher-priced models."
The second straight quarterly revenue drop, with a 12% fall, comes despite the launch of a refreshed version of its best-selling Model Y SUV that investors had hoped would help revive demand.
A 51% dive in sales of automotive regulatory credits, which other automakers who have difficulty complying with government emissions rules buy from Tesla, also hurt revenue and profit.
Revenue fell to $22.5 billion for the April-June quarter from $25.50 billion a year earlier. Analysts on average were expecting revenue of $22.74 billion, according to data compiled by LSEG. Adjusted profit per share of 40 cents lagged the consensus of 43 cents per share.
The automotive gross margin, which excludes regulatory credits, was 14.96%, above Wall Street estimates, helped in part by lower cost per vehicle.
Tesla global deliveries dropped 13.5% in the second quarter, which was below Wall Street targets.
The U.S. government later this year is cutting $7,500 tax credits for EV buyers.
AUTONOMOUS RIDE HAILING
Tesla had said in April it would start producing the more affordable model by the end of the first half and sources had told Reuters the vehicle, a stripped-down version of its Model Y SUV, would be delayed by at least months. Tesla on Wednesday did not disclose any details of the model, how many units it had made, or how it would be priced. Musk responded to a question of what the vehicle would look like by saying, "It's just a Model Y," joking that he "let the cat out of the bag there."
Tesla did say on Wednesday that it expects volume production of the long-promised cheaper vehicle in the second half of this year, raising hopes it will rekindle demand as it battles rising competition from cheaper EVs, especially in China, and a persistent backlash against Musk's far-right political views.
The company also said it continued to expect volume production of its custom-built robotaxi - called the Cybercab - and Semi Truck in 2026.
Much of the company's trillion-dollar valuation hangs on its bet on its robotaxi service - a small trial of which was started in Austin, Texas, last month with about a dozen Model Y SUVs - and on its development of humanoid robots.
"Autonomy is the story," Musk said on the conference call, describing plans to roll out autonomous ride hailing to about half of the U.S. population by the end of this year. Tesla is looking for robotaxi regulatory approval in the San Francisco Bay Area, Nevada, Arizona, Florida and other places, he said, and the company is close to getting regulatory approval for supervised Full Self-Driving driver assistance software in the Netherlands. The robotaxi business was likely to have a material impact on financials around the end of next year, Musk said.
Investors are concerned about whether Musk will be able to devote enough time and attention to Tesla after he locked horns with Trump by forming a new political party this month. He had promised weeks earlier that he would cut back on government work and focus on his companies.
A series of high-profile executive exits, including a longtime Musk confidant who oversaw sales and manufacturing in North America and Europe, is also adding to the concerns.
(Reporting by Akash Sriram in Bengaluru and Abhirup Roy in San Francisco; Editing by Peter Henderson, Anil D'Silva and Matthew Lewis)
Elon Musk indicated that cuts in U.S. government support for electric vehicle makers could lead to 'a few rough quarters' for Tesla.
Tesla posted its worst quarterly sales decline in over a decade, with profits missing Wall Street targets, although its automotive gross margin exceeded expectations.
Tesla plans to produce a more affordable model, a stripped-down version of its Model Y SUV, with volume production expected in the second half of the year.
The U.S. government is cutting $7,500 tax credits for EV buyers, which is expected to negatively impact Tesla's sales and revenue.
Investors are concerned that Musk's involvement in forming a new political party may distract him from his responsibilities at Tesla, especially after a series of executive exits.
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