Tesla CEO Elon Musk plans to shift the focus back to his electric vehicle company, announcing he will spend less time involved with governmental activities. This decision follows the recent loss in Tesla’s profits, which have dropped significantly. Musk relayed this news to analysts during a conference call on Tuesday, emphasizing that with his previous commitment to improving “Department of Government Efficiency” initiatives largely accomplished, he will be dedicating more attention to Tesla starting in May. Musk projected that he would now be involved in “government matters” for only “a day or two per week.”
Meanwhile, Tesla encountered selling challenges, attributed partly to public dissatisfaction with Musk’s involvement in DOGE, a cost-cutting group, which led to a noted division within the country. Tesla, based in Austin, Texas, revealed a startling 71% drop in profits, alongside a 9% dip in revenue for the first quarter. According to Dan Ives from Wedbush Securities, “Investors wanted to see him recommit to Tesla,” regarding Musk’s decision, describing it as a “big step in the right direction.”
In reaction to these developments, Tesla shares rose over 5% in after-hours trading, despite being down more than 40% throughout the year. The company reinforced its schedule to introduce a less expensive version of its Model Y SUV within the first half of this year. Looking forward, Tesla maintains its forecast of beginning a paid driverless robotaxi service in Austin by June and anticipates that a majority of its vehicles will achieve autonomous operation by next year.
Elon Musk expressed confidence in the upcoming autonomous feature, aiming for “millions of Teslas operating autonomously in the second half of the year.” During the conference call, he also indicated that drivers could expect to *sleep in Teslas and wake up at their destination* by the end of the year in numerous U.S. cities. Still, analyst Sam Abuelsamid from Telemetry Insight remains skeptical of Musk’s predictions, pointing out that the automated system lacks reliability and could cause crashes due to unexpected errors.
As part of Tesla’s technology development, the company plans to launch a robotaxi without steering wheels or pedals. However, federal investigators continue to evaluate the safety of Tesla’s driver-assistance technology, known as Autopilot. The National Highway Traffic Safety Administration is probing how effectively this system keeps drivers attentive. Further scrutiny is directed at the company’s Full Self-Driving system, especially regarding its performance under low-visibility circumstances due to sun glare.
Tesla is also confronting intensified competition in the EV sector. Chinese manufacturer BYD recently introduced an innovative battery technology that charges quickly, while European competitors are releasing advanced models. Musk’s support of far-right politics in Europe has further alienated potential buyers. For the quarter, Tesla stated profits decreased from $1.39 billion to $409 million, or 12 cents per share — significantly less than analysts had anticipated. Revenue reduced from $21.3 billion to $19.3 billion, falling short of Wall Street forecasts. The company’s gross margins slipped from 17.4% to 16.3%.
Tesla noted it would experience some impact from U.S. tariffs, asserting its predominantly domestic manufacturing would buffer it from the worst effects. Despite this, the company sources some materials from abroad, subjecting them to import tariffs. These tariffs could negatively affect Tesla’s energy storage division, too. China’s retaliatory trade measures have added pressure, recently forcing Tesla to halt orders for its Model S and Model X from mainland Chinese customers. Production of the Model Y and Model 3 for China continues at the Shanghai factory.
Helping ameliorate the quarter’s results was Tesla’s sale of “regulatory credits” to car makers lacking emissions standards compliance. Credit sales earned Tesla $595 million, up from last year’s $442 million. Additionally, the company generated $2.2 billion in cash flow, an increase from $242 million a year prior. Morningstar analyst Seth Goldstein noted that prior reports of declined sales, which had depressed stock prices, rendered the quarterly results somewhat predictable, stating, “They’re not particularly surprising given that deliveries were down,” although “it was good to see positive cash flow.”